Let me preface this discussion by saying that I am not offering tax advice, I am just commenting on my experience with the following tax preperation products.

Over the past several years I have done my own taxes using one of the online products available from Intuit, H&R Block, or TaxSlayer.com.  This year I set out to find the cheapest deal I could, while confidently preparing my taxes.   Since I do independent consulting work, I need to use a product that supports Schedule C and can handle self-employment taxes.  I didn’t review Tax Slayer this year, but I had a good experience with it in the past.  It was very cheap, using the free-file link from the IRS.  Tax Slayer was not as pretty or intuitive as the other apps, but it got the job done at minimal cost.

I started this year with H&R Block At Home Premium because it was the cheapest at $49.95 and I had a coupon to make it $34.95.  Everything seemed to go well at first, but I used this software a few years ago and I was surprised that it did not store any of my previous information.  I had to retype all my personal info and put in my family members and go through all the interviews.  I was interrupted and had to logout for a little while. When I came back to hrblock.com, I had a really hard time finding the button to log back in.  I then realized that I could click the button to start my return for $49.95 and it would let me log back in.  I had a problem entering my W2 info for my wife because H&R Block was expecting a 6 digit entry for the state employer ID field of the W2.  My employer id was 9 digits and preceded by an “R.”  This would definately not go into the form and the website would not let me continue.  I used the help feature and started a chat with a representative.  The help was useless and they would not recognize that the issue was a bug, they kept saying i could just enter the first 6 digits.  I don’t think so.  This would cause all kinds of havoc when the state started to process the return.  While waiting for the chat agent to become available, I did a quick search and found that the Alabama Department of Revenue changed the format of their ID numbers in 2007 to the new RXXXXXXXXX format.  I even pasted the line from the ALDOR that said be sure your Tax preparation software is aware of this change, but the support agent still refused that this was a bug and would not offer to submit it to the development team for correction.  At this point, my confidence in the application was starting to drop quickly.  I was starting to get frustrated with the interface and it seemed like the questions were not thorough and were not explained well.  It seems like H&R Block is no where near as good as it was years ago.  I actually enjoyed the software several years ago.  After completing the interviews, I was shocked that I might actually owe over $2500 to the IRS and that was just the federal portion.  I then decided to double check against TurboTax.

I used TurboTax online last year and it did a great job at helping me get through my taxes.  Intuit has a pretty strong product and the interface is visually appealing and very intuitive.  This year, they have made some enhancements that provide much more detail about the tax laws as you are completing the forms.  The interface easily guides you through the process and the flow helps you answer questions in an order that tries to keep you from getting bored and keeps you from duplicating your responses to similar questions in different sections of the interview. TurboTax also automatically imported almost all of my personal info from the previous year.  This was really great and kept me from having to re-type all that time-consuming info.  I was pleased that TurboTax helped me with my business expense reporting and had a thorough deduction section that really helped me maximize my return.  I was actually able to get a refund from federal and state.

One of the most important aspects of tax software, in my opinion, is the ability to make you feel like you are confidently completing the process and that you are able to answer all the questions accurately.  If you can’t confidently complete the interviews, then you probably need help with your taxes.  After that, I want to reduce my tax liability as much as possible and possibly get a refund.  I want to e-file my state and federal taxes and get my refund using direct deposit.  Finally, I want to pay a fair price for the service.

Overall, I would highly recommend TurboTax for filing your 2009 taxes.  I felt that it was easy to use, very accurate, and it helped me reduce my tax liability.  The cost was about $80 for federal and $30 for state.

If you are not self-employed, you can get by with one of the cheaper versions and save some more money.

Now that we have paid off all of our non-student loan debt, we have decided to prepare an emergency fund.   I have frequently heard Dave Ramsey say “if you know it is going to rain, you better have an umbrella.”   Well, my job is kind of like a large storm on the horizon.  I work for a start-up, albeit a rather nontraditional start-up.  That means there are basically two outcomes for my future with the company.  One outcome is the company is successful and we get acquired by another entity, resulting in a real valuation of my company stock and options.  This would be wonderful and would provide significantly for my family.  The other outcome is that ultimately we run out of steam and we all start looking for new employment.  Then there are the many possibilities that land somewhere between these two extremes.  But for the most part, the venture is Pass/Fail and this is exactly why we are starting to prepare a larger emergency fund.  In absence of all other possible needs for an emergency fund, and with the simplest of probabilities, there is a 50% chance that we are going to need an emergency fund at sometime in the near future due to lack of employment.

To fund this emergency fund, we will be channeling all of our debt snowball funds into savings and stop paying off debt.  This is a bit frustrating, but I feel it is necessary.  That being said, we will not be meeting our year end goal of $15,000 of debt payoff.  But we did make it a significant way there.   We now have only some low maintenance student loans, one of which is still deferred while Lindsey is in school and the other has very low interest.  As a result of our hard work for the last 2 years, we have been able to eliminate credit cards from our lives, we have a paid for vehicle, we have freed up a substantial portion of our monthly cash flow that was previously allocated to debt maintenance, and have an entirely different mindset about how we buy things.  We are permanently changed.

We made great progress this month.  We were able to free up some funds to pay off the car and it is gone off our debt list.  Now the day we get the car title in the mail, my boss tells me I have to turn in the company truck at the end of September.  I guess Murphy is just resisting.  (Murphy’s Law – Anything that can go wrong will go wrong) In addition to this, our transmission starts acting funny and we have to sink $228 bucks to flush the transmission fluid.   If that was Murphy’s last stand, we could handle it, but no he is not done.  I went to the oral surgeon this morning for an inital consultation for getting my wisdom teeth taken out and they let me know that we are going to have to come up with $800+ because my dental insurance isn’t very good.  Did I mention our TV is going haywire?  The colors split up and we have to watch 3 different images on the screen until it decides to converge.

I guess this is the point where I could get frustrated and say its time to give up paying off the debt.  But no, even when things get tough, there is one really important concept to remember.

Whether you participate or not, the cash flows.  By this, I mean that no matter what happens, if you don’t spend less than you make and keep an eye on where you are spending, you will always be broke.  Once you understand this, you understand that as hard as it gets, you have no choice but to keep on budgeting and paying off the debts.  There is only one road to financial freedom and we are on it.

Instead of being pessimistic, I try to remember that I would be in a much more difficult situation now if we had not made all these sacrifices over the past year and a half.  I have heard that God only gives you as much to deal with as he knows you can handle.  This is how we show him we are up to the challenge and ready to excel.