The first time I used Freetaxusa, I also filled out TurboTax as usual, and found that with TurboTax I made a mistake that would have cost me well over a thousand dollars in overpayment. I then realized that I had made the same mistake the previous year with TurboTax, so I filed an amended return and was able to get back well over a thousand dollars. Thanks Freetaxusa!
The mistake was user error in entering a backdoor Roth IRA contribution. Freetaxusa makes it easy to enter correctly, and turbotax makes it easy to screw up.
I had a similar experience! At first I thought freetaxusa was too good to be true so I filled out TurboTax as well. When I finished, my freetaxusa refund was larger! Like you, I had made a mistake when using TurboTax.
On form 1040, under “IRA distributions - taxable amount” (box 4b), TurboTax filled in the amount of my IRA conversion. It should have been left blank.
This caused my taxable income to be increased by the amount of the conversion. Not good. My biggest mistake was not being more diligent about looking over form 1040. I feel like it should have been a pretty obvious error.
I despise that “minor clerical error in massively complex tax system with multiple forms causes significant money losing tax implications for your average end user” is even a thing in the first place.
The IRS has actually caught some that I've made, the only time they've ever complained to me has been to send me a larger check. First they send you a scary looking notice that they detected a discrepancy, and you have to agree, but each time it was an error that when fixed improved my refund.
I mean, I obviously agree that the complication in the US tax system is crazy, and also think that every country should do what the UK does in allowing PAYE income taxation (Pay As You Earn - most people in standard jobs have their company take the correct amount of tax from each salary payment and pass it direct to the government, the employee then doesn't even have to file taxes at the end of the year unless they have special circumstances).
But in this specific case of "minor error [...] leads to significant money losing tax implications" - it is really an error that would be possible in absolutely any "fill in your tax info situation", since the mistake they made was writing the wrong number into a "taxable income" field. That mistake can still be made even in a country whose tax system is as simple as "everyone pays X% of their income as tax, and fills in a one-field form where the only question is "what was your income for the year?". (But yeah, a simpler system would mean less opportunity for making simple mistakes, and easier to check if any have been made, for sure.)
I think you just made the point for me, if you have a system like PAYE there’s no room for minor clerical errors for the vast majority of people since there is no opportunity to even make the clerical error in the first place. You just look at the taxes and verify they are right and off to the races. This is how most civilized nations work, except the USA
This mistake was a consequence of the complicated tax system. It involved a complex maneuver (the backdoor Roth) that TurboTax supports but has a bad UX for. Presumably a less complicated tax system would eliminate these kinds of complex maneuvers
I wouldn’t be surprised if I made the same mistakes :S Been so far always using TurboTax, and I distinctly remember the backdoor Roth IRA gave me so much headache.
The mistake was user error in entering a backdoor Roth IRA contribution. Freetaxusa makes it easy to enter correctly, and turbotax makes it easy to screw up.