Best Tax Software for 2016 Returns?

[BWillie]

I'm ready to stop giving a tax service $1500+ to do my taxes. It's too much of a racket, they're not always done right anyway. I'd like to attempt to do them with software this time. Other than it just being a pain in the ass, what other advantage is there to use a tax service? The shitty ones don't even use certified accountants anyway.

The software I've heard most about is obviously Turbo Tax. I'm not looking at the most basic tax software like Tax Slayer or Tax Act or whatever. I would probably need at least the Turbo Tax Home & Business. I have rental properties, lots of home interest to deduct, gambling income but I file as a pro (which seems to confuse everybody & nobody has ever done it the same), technically small business income w/ probably very few deductions (do not have an LLC even though live in KS so I'm probably a dumbass), used an HSA. Hopefully using a tax software will easily help me find deductions etc.

So, what do you guys believe to be the best tax software to use?

Turbo tax?
H&R Block?
Tax Act premium?
Jackson Hewitt online?
Any others etc

[DRU]

Originally Posted by Buehler445

Lots of good information here.

Definitely some things to be weary of.

1. If you incorporate or start an LLC, it will indemnify you from business risk - biggest thing there is if you are sued for a billion dollars they fold up the business but can't touch you. If you dig too deep in deducting stuff it will pierce the corporate veil and you are personally liable.

2. Be careful on some of the small business deductions. Lots of asshats (not pointing fingers at DRU here) use a business to commit as much tax fraud as they can cram into one 1040. Accordingly, the IRS is a bastard on some of this stuff. IRS shows up, and they find something, they are going to go to looking.

If you pay the kids through the business, make them do some work. If you can't, they get cranky.

I wouldn't do meals. Like at all. Unless you are taking non-relative employees out to eat too. Travel expenses are just asking for trouble. I wouldn't do it. And besides, I think you can only take half.

Cars are a tough ask. You are going to have to assess a business use percentage for each listed vehicle. And (at least for farmers anyway) you can't deduct more than 75%. And then, you have to deduct a proportionate amount of fuel, repairs, insurance, taxes, and all that jazz. And if you **** up, they ding you on it. Moreover, if you deduct it, then trade it off, if the trade in value is more than the book value, it is gain. More tax.

If it were me, I'd keep a mileage log, and pay myself mileage out of the business account. It isn't too bad to keep a mileage log. I did it because I was using a personal vehicle for a bunch of farm stuff, and I wasn't about to go **** around depreciating the asshole, and splitting all that other noise out. Plus, if there is gain, it doesn't matter on a personal vehicle. Sure, you don't get to depreciate it, but I wouldn't go down that road.

The home office thing is a must do. Now, they have a rate per square foot that's really easy. As long as the space is ONLY an office (no treadmill or whatever).

Yeah, the correct answer is find a GOOD accountant (There are shit ones) and get to work. Even if it is a schedule C or E or whatever, keep track of legit stuff, keep the documents, take the deductions, be happy.

Don't take stuff that isn't there, keep the documentation, take what you can get, but only what's there.

As I said...cautiously aggressive. You don't lie. That's where people get screwed up. You simply track all of your expenses, go over them with your CPA / EA, and you will be able to deduct all sorts of legitimate stuff that will save you thousands, and they will go to work for you (for free) if an audit happens. Some of them even offer audit insurance if you lose the case, so you're covered. Of course, that means they're absolutely doing things legitimately, so that never happens.

Meals and Entertainment, Travel...those are areas people do take advantage. Just don't take advantage. Use it legitimately, and you'll still have more money in your pocket at the end of the year than if you weren't doing that. You'd be surprised how easy it can be to make those types of things legitimate, too. For example, have a relative in another state? Make them part of your board of advisors. Guess what? Every time you go visit them or they come visit you...100% write off. Completely legitimate. Go on vacation once a year with the family? Make it your annual board meeting and the whole thing can be deducted. You just can't have 20 board meetings in a year, for example. That would be a red flag and you'd be in trouble (and your CPA/EA wouldn't let you do it anyway.)

Yes, of course, if you're paying your kids they have to be doing work. But guess what...you need a paper shredder, right? You need somebody to enter transactions and reconcile bank accounts, right? You need somebody to sort bills and trash all the garbage, right? How about social media marketers? You can find legitimate tasks for kids to do to earn their money, and it gets them started at a very early age understanding work, money, business.

They actually have a "simplified method" for home office deductions now where if you check the box you get $5/ft. at 300 sq. fb, so you get a $1500 deduction ($375 cash in your pocket if you're in the 25% bracket) right off the top. If you do have a large house in an expensive area with a big office then you can still do the standard method and use the sq. footage calculations, but in most cases now the simplified actually makes it better and easier.

So yes, absolutely, if you're doing this you don't want to be doing taxes yourself. The savings will be huge, though, and it can change your life financially. As he said, find a good accountant, track your expenses, and it will be WELL worth it.

[mr. tegu]

Originally Posted by ChiliConCarnage

Thanks, I'll have to take a look.

No problem. It's KS Web File. https://www.kansas.gov/webfile/flow/home?execution=e2s1

[mikeyis4dcats.]

Originally Posted by DRU

As I said...cautiously aggressive. You don't lie. That's where people get screwed up. You simply track all of your expenses, go over them with your CPA / EA, and you will be able to deduct all sorts of legitimate stuff that will save you thousands, and they will go to work for you (for free) if an audit happens. Some of them even offer audit insurance if you lose the case, so you're covered. Of course, that means they're absolutely doing things legitimately, so that never happens.

Meals and Entertainment, Travel...those are areas people do take advantage. Just don't take advantage. Use it legitimately, and you'll still have more money in your pocket at the end of the year than if you weren't doing that. You'd be surprised how easy it can be to make those types of things legitimate, too. For example, have a relative in another state? Make them part of your board of advisors. Guess what? Every time you go visit them or they come visit you...100% write off. Completely legitimate. Go on vacation once a year with the family? Make it your annual board meeting and the whole thing can be deducted. You just can't have 20 board meetings in a year, for example. That would be a red flag and you'd be in trouble (and your CPA/EA wouldn't let you do it anyway.)

Yes, of course, if you're paying your kids they have to be doing work. But guess what...you need a paper shredder, right? You need somebody to enter transactions and reconcile bank accounts, right? You need somebody to sort bills and trash all the garbage, right? How about social media marketers? You can find legitimate tasks for kids to do to earn their money, and it gets them started at a very early age understanding work, money, business.

They actually have a "simplified method" for home office deductions now where if you check the box you get $5/ft. at 300 sq. fb, so you get a $1500 deduction ($375 cash in your pocket if you're in the 25% bracket) right off the top. If you do have a large house in an expensive area with a big office then you can still do the standard method and use the sq. footage calculations, but in most cases now the simplified actually makes it better and easier.

So yes, absolutely, if you're doing this you don't want to be doing taxes yourself. The savings will be huge, though, and it can change your life financially. As he said, find a good accountant, track your expenses, and it will be WELL worth it.

I think your definition of "legitimate" and the IRS's are probably different. I had a buddy who's family biz found out the hard way that a drywall contractor claiming a boat, some sports cars, motorcycles and lot's of other "legitimate" expenses is frowned upon.

[BWillie]

Originally Posted by Buehler445

I work for an accountant during tax season, so my advice is limited.

My buddy uses Turbo Tax. He tried to take deductions on a listed vehicle and threw in the towel (He's a CPA). Probably works OK, but don't try to deduct vehicle usage.

Honest answer, get a better accountant. I don't think my accountant charges 1500 to anyone but a few giant customers she has to spend a shitton of time reconciling junk books or complicated notes and intercompany bullshit.

I'd bet I could knock yours out in a couple hours with a half hour of setup and an hour of review, and I'd bet she'd charge you <$500. Obviously that would depend on what all you have and what you have for records, but if it were me (me being some version of me not working for an accountant), I'd just find a better accountant.

Whenever I bring up the gambling income, and that wanting to file as a pro they start to freak out and tack on a "0" on what my tax return should cost. I don't think many have a firm grasp on how to do it.

For example, say I've played 200 poker sessions in one year. Lets say I came out a winner in 100 of those sessions for $300,000. The other 100 sessions I lose $300,000. It's ludicrous that I would be taxed on the $300,000 I "won" when in reality I would have profited $0 for the year. Same can be said for a tournament player, he could have played in 50 tournaments, won $70,000 in those tournaments (and been 1099'd or whatever the tax form they give us is when we cash in a tourney), but paid $120,000 in entry fees. To tax him on the income even though he's down $50,000 is silly. From what previous accountants have told me, it's easy to file as a pro federally but apparently the state tax with Kansas is really ****ed up on what you have to do. If you don't file as a pro in Kansas, you can't subtract your losses from your GROSS WINNINGS, which isn't your year profit anyway. I could be wrong on that, but that is what I generally am told by other accountants. Most of them are always confused about doing it so that has been the biggest hurdle.

Also, when filing as a gambling pro there usually is a way to deduct travel, hotels, entry fees, software & other expenses relating to it etc

[BWillie]

Originally Posted by DRU

If you don't have a business, you should create one. The tax benefits / savings will put thousands back into your pocket each year.

Seriously, it can be anything. Make it official and start tracking your expenses. Turn your after tax expenses into before tax expenses, and you'll save a bunch. If you have kids it's even better. Instead of paying taxes and then spending money on your kids, pay them through your business (which gives you the deduction) and then let them pay for their own stuff using their own bank account / debit cards. School supplies, lunches, clothing, sports stuff...all the stuff you spend on the kids anyway.

The first $6k you pay a kid under 18 is completely tax free. You get the deduction, so for example, if you're in the 25% tax bracket, that's $1500 your putting back into your pocket. You don't even have to pay FICA on that money, and the kid doesn't pay any income tax on that first $6k either.

What's cool, too, is that since they have a job you could open an IRA for them and get them started at a very young age with retirement savings. An early start on compounding is never a bad thing. So then, if you have the cash anyway or if the business is doing well enough to generate it, you can pay the kid another $5500 and get the deduction, and then that can go directly into the IRA tax deferred. So now you're getting a $11,500 deduction ($2,875 back in your pocket), and the kid has a solid foundation to build from as they grow up and are ready to become financially free.

Another example is your cell phone. Not uncommon for people to have $100/mo ($1200/year) phone bill. Again, assuming you're in the 25% tax bracket, that's another $300 you'd be putting back into your pocket.

You do this with auto expenses, home office, dining and entertainment, travel, etc. and you can save thousands. Then you can put those thousands towards debt, or if you're out of debt, back into the business, or towards buying other assets that generate more positive cash flow.

Owning a business is a fantastic way to "get ahead" because of the tax savings. So worst case you're pocketing the tax savings, and best case it takes off for you and becomes a solid secondary source of income or even a primary source.

Start a business!!!

Dude...teach me. I am lazy. I will pay you, just tell me what I need to do and how to officially set the business up. I hear in Kansas if you have an LLC you don't even have to pay taxes on the earnings cuz of Brownback. I just don't know how to do it. I need a step by step because I have an extremely low iq and lack the intelligence to succeed.

My home office use is legit for what I do, but it's not enclosed in a room. It's just in my basement suite that also has a kitchen, bathroom etc but no windows. Not sure if I can even deduct a home office.

[DRU]

Originally Posted by mikeyis4dcats.

I think your definition of "legitimate" and the IRS's are probably different. I had a buddy who's family biz found out the hard way that a drywall contractor claiming a boat, some sports cars, motorcycles and lot's of other "legitimate" expenses is frowned upon.

Ha, that is not at all the type of examples I've been giving. My definition of it has been approved by CPAs, EAs, and Tax attorneys...and the IRS. I am not saying to buy boats, sports cars, and motorcyles. Yes, that would raise flags if you are a drywall contractor. Also, sounds like that person has bigger problems than tax write-offs. Buying that many liabilities is asking for financial disaster. Instead, you should create or buy assets that can then buy your toys...or even better buy other assets.

[DRU]

Originally Posted by BWillie

Dude...teach me. I am lazy. I will pay you, just tell me what I need to do and how to officially set the business up. I hear in Kansas if you have an LLC you don't even have to pay taxes on the earnings cuz of Brownback. I just don't know how to do it. I need a step by step because I have an extremely low iq and lack the intelligence to succeed.

My home office use is legit for what I do, but it's not enclosed in a room. It's just in my basement suite that also has a kitchen, bathroom etc but no windows. Not sure if I can even deduct a home office.

If you have an official business and you are using the office space to conduct business then you can take the write off. There are a few rules. For example, the space has to be the primary location for the business, and it has to be used exclusively for the business. That said, there are special circumstances (ie. Doctor, Dentist, etc.) where your primary location might be a place separate from your home, but then you use a home office to do bookkeeping and general office tasks for the business. In this case you'd still be able to take the deduction. Also, things change if you're taxed as S Corp or if you are a C Corp, but you can still get the deductions (at that point you either rent your home office to the business, or the business can reimburse the employee...and yes, if you're a sole proprietor then you are both the employer and the employee.) The S Corp is where huge tax benefits begin to kick in, but the business needs to be generating some decent revenue in order for that part to come into play. In fact, the Kansas trick you're talking about is when you have "pass-through" income, which is what you'd have with an S Corp.

I'm happy to help you out and give you some good resources to do more research on your own. Obviously, you should talk to a CPA/EA/Attorney, but they will back me up on everything I've said.

If you want to PM me some details about what you're currently doing I can give you some quick guidance on the best way to set it up as an official company.

[DRU]

To follow up on that KS trick for those that might be able to benefit from it...or if you're just interested.

When you have a job, you have all "earned income" which is what shows up on your W2 that you get, and the tax person simply plugs that into the tax return. If all you have is W2 information, maybe some kids and a house, then you might as well just do your own taxes in TurboTax or whatever. There's nothing any tax pro will be able to do any differently.

If you have a business, though, a whole new world opens up. When you first start, you could go with nothing more than a "Sole Proprietorship". This basically means you're running things in your own name and isn't generally recommended because you'd be liable for any weird/crazy thing this world could spit at you.

So that's why you go ahead and add the LLC tag to the business, and it still runs as "sole proprietor LLC". This separates you and your personal belongings from the business...the LLC. Everything still falls to your own personal tax return, and you file a Schedule C along with your 1040 at tax time. This is where you add all the deductions I've been talking about.

Now, at this stage you actually pay MORE taxes in one area...self employment taxes. This consists of the FICA stuff that you see getting taken out of your paycheck when you work a job. As an employee, your employer pays half of that tax for you. You pay 7.5% (which is what you see come off your check), and the employer pays the other 7.5% for the total of 15%. As a self employed person you will be paying the entire 15%. This part does suck, but the deductions and the savings will be much better, so it's not that big of a deal until you start making good money with the business.

Once you are making good money with the business, now you can turn it into an LLC Sub-Chapter S (S Corp). This is still an LLC, but it's taxed as an S Corp. This is a beautiful thing.

As an S Corp, you can pay yourself a salary through an actual payroll system. The salary that you pay yourself has to be a "reasonable salary" and there are lots of debates about how to come up with that number. I basically just think of it like, if I were to hire somebody for what I do, how much would I pay them? You may have a job, though, where you don't have to work a lot of hours, so your salary could actually be quite a bit lower if that was the case. That's unique to each individual and needs to be worked out accordingly.

Anyway, the salary you pay yourself gets the normal FICA (social security, medicare) and income taxes taken out just like a paycheck does. The additional amount you pay yourself from the business above and beyond that, though, does not have to pay FICA. So now you're saving 15% of whatever that amount is. You still pay income tax on that amount, but just not the FICA. So that can be huge savings.

For example, say your business generates $120k net, after expenses and being cautiously aggressive with your deductions. If you just pay yourself that $120k you would have to pay 15% of that entire amount in FICA taxes. So instead, say you pay yourself a salary of $60k/year, and the other $60k you pay yourself as a shareholder dividend. This would be a W2/K1 split, because you would show salary income (W2) of $60k and shareholder dividends (K1) as separate income.

The $60k that you get on the K1 does not get any FICA tax hit. 60000 * .15 = 9000. That's $9,000 you'd be putting back into your pocket in that example, just by doing the S Corp W2/K1 split. Again, in most cases you still pay the income tax on this portion...just not the FICA.

Now, the KS thing is even better! If your business is in KS, you don't even have to pay income tax on that K1 portion!! If you live in MO then MO ends up taking it from you, so it doesn't help you then. But if you live in KS and you have KS S Corp, and you're paying yourself a "reasonable salary"...anything above and beyond that salary would be completely tax free.

So then if you get to the point where you do hire somebody to take your position, and you pay them that salary instead, now your only income is K1 income, and you don't pay any taxes at all. Boom!

Now you can take all of these tax savings, get out of debt, and start buying assets. Build or buy other businesses, rental properties, etc. The more assets you buy the more tax breaks and more savings you get.

Meanwhile, all the people working hard in a job, getting promoted to get more money...just get more taken right off the top. If you have nothing but a W2 then you're getting screwed, quite frankly.

It's why the rich keep getting richer and the poor and middle class can't get ahead. If you're an employee they're taking almost 50% of your money when it's all said and done before you get to spend any of it. It's no wonder you don't have anything left over to save and invest. You don't have to be rich to think like this and handle your finances, though. It can be done at any level, and at any level it will help you get ahead.

Turn yourself into a business...no matter what it is...and you open yourself up to a world of savings that can truly change your financial situation.

If you're buying boats and sports cars and motorcycles (ie. liabilities) like the guy mentioned previously, then you're doing it wrong. Buy assets, and the positive cashflow from the assets will buy all the toys you want later.

[Jiu Jitsu Jon]

Cats can be listed as dependents IF they identify as people. Also, check the boxes that say things like "blind", "veteran", and "member of the clergy".

[DRU]

Originally Posted by Buehler445

Lots of good information here.
1. If you incorporate or start an LLC, it will indemnify you from business risk - biggest thing there is if you are sued for a billion dollars they fold up the business but can't touch you. If you dig too deep in deducting stuff it will pierce the corporate veil and you are personally liable.

I stepped over this before, but it's an important point. The best way to protect from this is to maintain the company properly. What does that mean? Keep actual records of board meetings, minutes (notes), etc. If you're claiming travel, keep documentation of why the travel is for business (ie. board meeting, advisor meeting, checking up on a rental property, employee perk, etc.) This is not a difficult thing to do with Google Drive or something similar on your phone. Just take quite notes about who you're with and what you're doing. If you're thinking that you may want to write off some particular travel, dining, entertainment, take some quick notes.

If you're ever audited or taken to court and you can present clean documentation for all of that sort of stuff you'll be just fine.

So yes, owning a business will require some organization. Clean books, clean company maintenance, and legitimate tax avoidance (not evasion...big difference) and you'll be just fine.

[Buehler445]

Dru brings up a lot of good points. On an S corp, I've always been told (I haven't seen rules in it so it may be BS) but you don't want to take equity draws (cash disbarments not through payroll) of more than your salary.

I've always thought about it more in retained earnings. I have an S Corp. and it was damn expensive to retain earnings, hence the s corp. but it's really all balance sheet transactions. Debt service, asset acquisition, equity gains. All is a lot easier to swallow without the burden of SE.

Another thing is you have to watch equity if you take big draws. You can't have negative equity. Well, you can I guess, but don't do it.

[DRU]

Originally Posted by Buehler445

Dru brings up a lot of good points. On an S corp, I've always been told (I haven't seen rules in it so it may be BS) but you don't want to take equity draws (cash disbarments not through payroll) of more than your salary.

I've always thought about it more in retained earnings. I have an S Corp. and it was damn expensive to retain earnings, hence the s corp. but it's really all balance sheet transactions. Debt service, asset acquisition, equity gains. All is a lot easier to swallow without the burden of SE.

Another thing is you have to watch equity if you take big draws. You can't have negative equity. Well, you can I guess, but don't do it.

There are different ways people come up with "reasonable salary" for the W2 portion of an S Corp. Most that I've seen are some sort of a percentage, where at first they typically stick to a 50/50 split, but as the income increases, the percentage you have to take as W2 income goes down. So if you're talking about $50k, you should probably do at least $25k/$25k split.

If you're talking about $250k, paying yourself $80k W2 and the $170k as K1 is typically just fine. Again, it gets to a point where it wouldn't make any sense to pay a salary that high for the position in question. For example, hire somebody for $60k - $80k or whatever the position would require, and take rest as K1 income only. Don't even mess with W2 for yourself. Or again, if you're still doing that part yourself and paying yourself the W2, a CPA/tax pro would be just fine backing you up on that. You would have that discussion with them while coming up with the split that you're both comfortable with.

These are the sorts of things that do require looking at the individual scenario and fine-tuning the details to best suit your needs and stay within the tax laws legitimately. When you get to that point, though, you'll have a CPA there to help you with these sorts of plans, and of course as mentioned before, you want to make sure you have a CPA who is well versed in all of this stuff and doing the best to help you maximize your savings.

[Buehler445]

Originally Posted by DRU

There are different ways people come up with "reasonable salary" for the W2 portion of an S Corp. Most that I've seen are some sort of a percentage, where at first they typically stick to a 50/50 split, but as the income increases, the percentage you have to take as W2 income goes down. So if you're talking about $50k, you should probably do at least $25k/$25k split.

If you're talking about $250k, paying yourself $80k W2 and the $170k as K1 is typically just fine. Again, it gets to a point where it wouldn't make any sense to pay a salary that high for the position in question. For example, hire somebody for $60k - $80k or whatever the position would require, and take rest as K1 income only. Don't even mess with W2 for yourself. Or again, if you're still doing that part yourself and paying yourself the W2, a CPA/tax pro would be just fine backing you up on that. You would have that discussion with them while coming up with the split that you're both comfortable with.

These are the sorts of things that do require looking at the individual scenario and fine-tuning the details to best suit your needs and stay within the tax laws legitimately. When you get to that point, though, you'll have a CPA there to help you with these sorts of plans, and of course as mentioned before, you want to make sure you have a CPA who is well versed in all of this stuff and doing the best to help you maximize your savings.

That's just what I've been told. I don't know if that's BS from my accountant, but she won't let anyone take more draws than their salary. Might be an audit flag.

[DRU]

Originally Posted by Buehler445

That's just what I've been told. I don't know if that's BS from my accountant, but she won't let anyone take more draws than their salary. Might be an audit flag.

I really think you need to find a new CPA, or at least bring this up and discuss it more detail with her. You're potentially giving Uncle Sam a lot of money you don't need to be.

[Buehler445]

Originally Posted by DRU

I really think you need to find a new CPA, or at least bring this up and discuss it more detail with her. You're potentially giving Uncle Sam a lot of money you don't need to be.

Ummmm... No. The main reason I have the S-Corp is to retain earnings and service debt without the burden of SE tax. I do most of my work in the S-Corp, so my wage needs to be pretty high to be reasonable. I'm good.

Besides I work for her during tax season and she pays me (more than I pay myself).