Turns out my poor tax planning hurt me more than I had expected. On Friday we went to pick up our returns in the best of moods because we assumed we would be getting a couple of thousand returned to us. We were already starting to plan the vacation we would take with the money we got back. Well….turns out we owe a couple of thousand. Both of us were dumbfounded when the tax preparer told us.
How could this be?
- Getting married hurt us- In 2009 I was able to file head of household and deduct more.
- Not owning a home- In 2010 we rented our home so we did not have home mortgage interest that we could deduct which both of us had in previous years.
- 401k rollover- I rolled over a 401k from a previous job into my Roth IRA. It was only about $6000, but that’s $6000 that I now needed to pay taxes on.
- Charitable contributions- We did a poor job keeping track of our charitable contributions. We both volunteer a lot outside of our nonprofit jobs and we could have deducted mileage and other expenses that we incur when volunteering. We also donated several loads of items to Goodwill, but never collected the receipts. You’d be surprised by how much you can deduct when you itemize these donations.
- Rental expenses- Though we do a good job of keeping track of the direct costs we put into repairs on the homes we rent out, we did not track the mileage for driving to and from the homes and smaller costs like paint brushes or cleaning supplies.
Though I know we were new clients and we came to the firm towards the end of the season I also felt that our return was rushed. If it had been brought to our attention that we were going to owe we could have worked to gather more of the documentations some of the charitable contributions or rental expenses. Also, we hosted an exchange student and were surprised when I asked what our deduction for that was and she said nothing. I came home and researched it and found that in there in fact was a deduction of at least $50 a month we could have taken.
So do I gather more information and pay them to restate it?
May not apply to your situation, but we got burned by the Oregon Legislature’s late extension of some tax breaks scheduled to expire this year. We use TurboTax, and filed before they did an update to reflect the law changes. Still haven’t received any notification from TurboTax about it – I just happened to see an article in the Oregonian. The changes reduced our tax due by $400.
http://blog.oregonlive.com/finance/2011/03/turbotax_still_hasnt_updated_s.html
Well in this case my procrastination paid off and filed after all of the Oregon forms were updated, but you bring up a good point. I spoke with Brent Hunsberger from the Oregonian shortly after her wrote that article and was shocked that there were updates still to be made so late in the season. I imagine there are many people that filed early like yourself and have no idea that they could have more coming to them. Are you going to restate your taxes? Does Turbo Tax have a form for you to use when restating?
Brent’s blog about the updates
I did file an amended return. I may quit using TurboTax over the way this was handled.
If you open your filed and accepted return in TT, after they released the update, TT just recalculates your Tax Due. No warning, no message – if you weren’t looking for it you might not even notice.
If you try to use the ‘File an Amended Return’ function in TT, the first requirement is that you haven’t changed your return since you filed – which of course TT has just done!
TT support was clueless about this issue, which amazed me.
In the end, i went through my orginal return vs. the updated forms line-by-line, overrode the changes TT had made after the update, started the amendment process, then un-overrode the changes to generate the amended return.
We’ll see….