Tax software is OK, but only if your taxes are simple

Peter G. Robbins, The Daily Record Newswire

Q: I have been preparing my tax return for the past few years using tax software I found online. Do you think the low-cost tax return preparation packages do a decent job, or am I asking for trouble? I really don’t want to go up against the Internal Revenue Service.

A: I suppose I first must issue the obvious disclaimer that I make my living helping individuals and businesses with their taxes, and a part of that service is preparing tax returns. So I am probably a bit biased toward using a tax professional. But that said, it really depends on your personal tax situation.

I feel pretty comfortable as an amateur handyman around the house, and I complete many minor home repairs myself. But, when the big repairs are needed I call in the pros. The pros always cost a lot more than me (I’m really cheap around the house!) but they have the tools and the expertise to do the job right. It is no different with your tax return. If your return is fairly simple, the commercially available and online software can do an adequate job. As your tax picture gets more complex, you may need to consider seeking help from a professional.

While I do not use the basic tax preparation packages (my firm spends many thousands of dollars a year on highly sophisticated tax preparation applications), I often see tax returns prepared using these systems when clients seek help or a second opinion. I rarely see a calculation error on these returns because the computers do a good job with the math. But I do at times see missed opportunities or misreporting due to input error. I also occasionally often see perfectly fine tax returns.

So use your best judgment to determine whether your return fits within the design parameters of the software you are using. There is never a guarantee that the IRS or the Idaho Tax Commission will not audit your return, regardless of who prepares it. The real question is whether you feel it is as accurate as possible.

Q: My wife lost our refund check! She claims I lost it, but I know I gave it to her. What can we do?

A: Each year, many individuals either never receive or lose their refund checks. According to the IRS, nearly 88,000 refund checks are undeliverable each year, and more are lost once received. So here are a few steps you can take to get that money in the bank.

First, go to the “I’m waiting for my refund” link on the IRS website (irs.gov). I’ve mentioned this link in a previous column, but the link includes a couple features that will help with lost or undelivered refund checks. You will need to enter your Social Security number, filing status and refund amount to use the system. Once that information is entered, you can notify the IRS of a change of address, and you can also begin tracing your refund. Following the instructions will automatically update the IRS database and in turn allow the IRS to get an undeliverable check to the proper taxpayer.

In addition to going online, married couples filing joint returns will be instructed to mail or fax Form 3911, Taxpayer Statement Regarding Refund. Both husband and wife are required to sign this form. And it should be noted that the IRS requires you to wait 28 days after the date the refund check was originally mailed to begin the tracing process.

The other option is to actually call the IRS at 1-800-829-1040. After fighting your way through an automated menu system and waiting for a time on hold, you will be able to speak to an agent who will be able to help.

In the future, I recommend that you have your refund check directly deposited into your bank account. You can do this regardless of whether you e-file or paper file your tax return. The money goes straight into your account and there is no possibility of a refund check being lost. Plus, you will receive the refund quicker. And best of all, you won’t need to argue about who lost the check!

To ensure compliance imposed by IRS Circular 230, any U.S. federal tax advice contained in this article is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed by governmental tax authorities. The answers in this column are meant to offer general information. You should consult your tax adviser regarding the specifics of your situation.

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Peter Robbins is a partner in the Boise, Id., office of CliftonLarsonAllen, LLP specializing in tax matters for small businesses, individuals, and trusts and estates.