It’s not a waste of $50 (or more if you want premium for stock sale, or home & business for self-employed). You can fill out the form and check the totals for free. You don’t pay until you file. It’s a similar idea with other online tax software that I am familiar with.
I did this last year. Turbotax offered me a “$0 federal. $0 state. Any situation” deal last year, so I tried Turbotax. I compared returns between online and download version. I also tried some other options, but stopped before filling out details when I found out 1099-Bs were not directly imported (PDF reads were not accurate enough for my needs).
Initial results did not match exactly, leading to manually viewing and comparing forms on both online and download until I figured out what was different. The differences were different basis for backdoor Roth (question phrased differently in online and download version), a typo in entered % government for one of the dividends (gov are state/local tax exempt), and a lagged change from updated W2 on download such that withholding penalties were not immediately removed.
Ah–good to know! I am bit old school I guess, and prefer the desktop version that I install and can reference in future years. Fidelity offered me the free online version but I still opted to buy the program from Costco.
I always thought I needed Premium but I finally bought Deluxe a couple of years ago and it has been able to handle everything I needed.
We do our own taxes. But we do have our fee-based FA take a look at it. He once found an error based on the way we had incorrectly answered a Turbotax question.
Please note that after a few years (3 plus the current year), the desktop software is no longer downloadable and updatable. So, a new computer, a hard disk crash, etc, will result in the software being unavailable.
Please be sure to make a pdf copy for your records.
We do save PDF (I think… we switched to my husband being primary tax guy the year that he retired ahead of me). But we are old school and keep printouts too. Last year I dramatically thinned down our basement filing cabinets. Old tax records included all sorts of receipts and even paper paycheck stubs. It was a trip down Memory Lane.
@CT1417 Thank you. If all your income is from LTCG and over, would you say the marginal tax rate is 0-20% depending on the income? Now what if you have a mix of ordinary income and LTCG, say $50K ordinary income and $50K LTCG married filing jointly? Do you pay 12% marginal rate on ordinary income $50K and switch to 15% for LTCG $50K? Or?
H always did our taxes ( using Turbo Tax) and I reviewed them. When he got sick last year I had just one item to add and when I did that, Turbo Tax had some sort of glitch and would not let me file on line. D tried to help ( she has used TurboTax for years) to no avail.
H was in the hospital with a terminal diagnosis. I ended up printing the tax return and mailing it in. A few months later, I got a notice from the IRS, they needed a piece of documentation, ( one not needed for on line filing). After I sent it in, I was fined!
I don’t have the bandwidth to deal with this right now and I no longer trust Turbo Tax.
My FA will be handling my tax prep this year. I am happy to pay.
I back up my entire computer every two months, including all applications, so hopefully I will be OK if my computer were to crash. I generally only go back a year or two to see how I handled something.
And I always export a PDF of the returns when filing. Thanks again!
Those CP2000 notices from the IRS are annoying. My son received one while in college with a $3500 payment request. Long story, they were wrong, and after I responded with documentation and waited for many months, they instead sent him a refund check for a couple of hundred. I still do not know why he received a refund, but am guessing I reported his summer research stipend incorrectly?
I am very sorry about your husband, and am not suggesting that everyone should use TT. My comment was in response to Mom22039 who commented about paying the CPA and other expenses she is now realizing.
Many people do not have the bandwidth to deal with filing tax returns, and I have wasted many hours struggling with TT as I learn it. It kind of helps to have a rough idea of what to expect b/c an incorrect entry can result in a mistake in either direction. One year I ended up starting a new return for my son b/c I knew the final TT result was incorrect but could not figure out what I had entered incorrectly. (NYC part year resident taxes can be tricky–or at least they tripped me up!)
I am a bit reluctant to respond here as I never looked at taxes until less than ten years ago when I started filing my own. Here goes, with the caveat that hopefully someone will step in and correct me if I am wrong. I have learned a lot along the way, but there’s plenty I do not know.
I believe that you will pay ordinary income tax on $50K, but the standard deduction applies first–or greater, if you are itemizing and taking advantage of the new $40,000 SALT cap. Let’s assume std deduction.
MFJ deduction is $32,200 (assuming under 65), so $50K less $32.2 = $17,800 taxed at 10%. (The 1st $24,800 is taxed at 10% MFJ.). I think–but verify this–that the zero percent capital gains space remaining for you would be $98,900 less $17,800, so the entire $50K capital gain would be taxed at zero.
I don’t know if these diagrams will help or confuse. The zero percent capital gains space stacks on top of ordinary income, after deductions.
Back to the topic of retirement after a spouse dies. I think it is difficult enough to plan for a 2 person retirement, let alone for a 2 person retirement with a future 1 person retirement. I know we will have large RMDs as a couple when that time comes with big tax implications, it will be even bigger if there is only 1 of us, and even worse if it falls on my high income daughter as an inheritance. This is the price we pay for having been big savers all our lives and lived frugally. I don’t see any solutions to this issue, so I am just going to not worry or think about it.
One way to help deal with this, that really isn’t too much effort, is to figure out what tax rate you wish to stay in. Our tax rate that we’re comfortable with is 24%. Then convert whatever amount every year into a Roth that keeps you within your desired tax rate (as long as you don’t have any complicated tax consequences).
Having a good pot of Roth funds is very handy for anyone who ends up with it, and if through the years you’re at a low tax rate, it’s really a waste not to convert it.
Yes, we will try to manage withdrawals based upon tax consequences. 2026 is the first year neither of us are using the state marketplace for health insurance (both over 65) and so we don’t have the added issue of income affecting our marketplace insurance rates and eligibility.
Roth conversions are a beautiful thing. Sounds like your dd is doing really well. One thing I’ve read (maybe here?) is to have your dd pay taxes on the conversion, because doing so now at 24% is better for her than 30+% down the road. It’s an investment in her future! Personally, only one of my kids is positioned well enough to do that, but I haven’t asked yet. And, truthfully, probably won’t.
Everything is crystal ball - my life expectancy, my husband’s life expectancy, my daughter’s age and financial situation at the time of her inheritance (things could change for her), costs of health care as we age (nursing care, etc.), tax rules and regulations at the time of any inheritance, and so on.
Too much uncertainty, you just try and do the best each year for that year.
Just a reminder as you plan for 2026 (or future years): if you have a taxable IRA, you can start doing tax advantaged charitable contributions from age 70.5 (ie not have to wait to donate via RMD methods).
“A qualified charitable distribution (QCD) allows individuals who are 70½ years old or older to donate up to $108,000 total to one or more charities directly from a taxable IRA instead of taking their required minimum distributions. As a result, donors may avoid being pushed into higher income tax brackets and prevent phaseouts of other tax deductions, though there are some other limitations.Starting this year, we will be doing church contribution via QCD. We had been using our DAF (donor advised fund), which our FA helped us create a few years ago when we cashed in a much-appreciated asset. But the DAF balance is getting low, so we’ll preserve that for other non-church donations. “
Our church donation is not gonna chew down much of the IRA balance that will be subject to RMD in a few years. But for people with enough wealth to donate $108K, it could be more meaningful.
My mother-in-law has had several close friends who have lost their husbands this past year. It’s put her in a panic as three of them have had problems getting funds as the bank account and credit cards were in the husband name. It has prompted my MIL to get her own credit card.
As a side note, I realized last year that our HHonors points were all in husband’s name. And the only way I could ever “inherit” them was if I already have my own HHonor account when he passes. So I set up my own account.
If I go first, he’ll probably forget I have an account and the few thousand points I got for joining etc. will be lost.
But just another thing to consider and prepare for.
Of course, another thing one could do with these accounts is not notify the company and just use the points/miles for their own travel. If a company is going to just take the earned benefits away, I would feel no remorse in doing that.
Some programs require the account owner to be on the reservation. Westin would not let me check in until my husband arrived to the hotel we booked with “his” points, but it was before they merged with Marriott.