Leap day comes but once every four years. In honor of this rare occasion, I propose 29 financial leaps to take. Here they are, in no particular order:
Prepare your taxes now. Spend an hour preparing your taxes online. If you don’t owe, file them now and receive your rebate now. If you owe, now you’ll have several weeks to save the money to pay the bill instead of panicking on April 15.
Deposit $29 into an emergency fund. If you don’t have one, start one today with this small sum. If you have one, add a little extra.
Stop paper statements. If you still receive paper statements, call the issuer or go online to turn them off. (Washington Mutual won’t do this). It’s a quick, easy way to protect your identity.
Order one of your credit reports. I request one report every four months, usually on the 1st of the month.
Make an extra debt payment ending in 29. If you have any debt, make an extra debt payment of $29, or any other figure ending in 29 ($129, for example). If you can’t swing even an extra $29, go for $2.90. Anything to give your repayment a little boost.
Organize your financial papers. Buy a simple metal box and organize your financial papers, finally. Use simple categories like “bank statements,” “tax returns,” and “receipts.”
Open a safe deposit box. Visit a local bank to open a safe deposit box. Put a copy of your marriage license, house deed or mortgage agreement, birth certificate, insurance documents, home inventory photos or video, and a computer backup inside.
Consolidate your savings. If you have savings in several different banks, and they don’t total more than $100,000, consolidate them down to one account in one bank.
Confirm old accounts. If you have any old accounts, contact the bank to let them know you’re still aware of the account. Hopefully this will avoid any unclaimed property seizures.
Search for unclaimed property. See if any states are holding your money and claim it today!
Start tracking your finances. If you don’t have a financial tracking system in place, start one now. It can as simple as a lined notebook with a page for every month where you list your bills and deposits or as complex as software.
Discuss your finances with your spouse. If you’re not in the habit of talking about money with your spouse, do it today. Review all of your important financial documents, including your checking and savings accounts, retirement balances, portfolios, insurance policies, mortgage, and college savings programs. Discuss your personal spending habits and beliefs.
Set joint financial goals. Setting joint financial goals with your spouse can help you both curb your spending. Choose one goal, whether it’s saving for your dream vacation or remodeling the kitchen, and make a plan to work toward it.
Make a debt or savings poster. If you need visual goal reinforcement, draw a thermometer on a big piece of paper. Put your pay-off or savings goal at the top. Now color it in each time you make a payment or deposit. Use green ink to show your progress!
Track your spending for one day. If you’ve never tracked your spending before, tracking it for one month is best, but try it for one day just to see how easy it is.
Read a financial magazine. Even if you already read a financial magazine regularly, try a different one to see how you like it. Visit the library to read one for free.
Balance your portfolio. If you haven’t balanced your portfolio in the last twelve months, review it today and make necessary adjustments. Don’t make panic adjustments, if the fundamentals are still good, stay the course.
Read a personal finance book. Ask the librarian for a good one. Even if you disagree with the advice, it’s always good to get a different perspective.
Turn off the TV for one week. Stop watching TV for one week and see if it affects your spending. Do you want less stuff because you’re not seeing commercials? Do you enjoy life more because you have more time to do other things?
Research one stock that interests you. Even if you don’t invest in the stock market, research one stock in-depth just to get in the practice. See if it’s really as good as you think it is. If it’s really good and you can afford it, invest.
Invest in an index fund. This one will cost much more than $29, but if you have enough money, invest in an index fund today. Vanguard is one of the best fund families with the lowest expenses.
Don’t spend any money for one day. Brown bag your lunch, skip the coffee, don’t buy that snack. Go one day without spending any money. Now see if you can make it two.
Pay cash for everything for one day. Withdraw $20 from the bank in the morning, or limit yourself to whatever is in your wallet. Buy everything with cash for that one day. (Bonus points if you do this on a grocery shopping day.)
Set up automatic transfers to savings. If you’ve paid off your debt and are in saving mode, set up automatic transfers for the day after payday (just to be safe). If the money is whisked into your savings account automatically, you’ll never find excuses not to save.
Consider switching banks. If your bank charges checking account fees and you don’t have direct deposit, or if they charge for online bill pay, consider switching to a bank that offers both for free.
Purge your stuff. Go through your home from top to bottom and purge all the stuff you don’t want anymore. Sell it, donate it, or throw it out. Whatever you do, get it out of your home and your mind.
Set a one-in, one-out policy. Vow that every time you buy something, you will get rid of something else. Bonus points if you can make it one-in, two-out.
Get rid of your storage unit. If you have so much stuff that it has to be in storage, then you probably don’t need it. Visit your storage unit and do a full inventory. Then steadily get rid of the stuff. Once it’s empty, cancel the unit.
And now a special bonus leap because I’m a fan of Monk:
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Do you have any financial leaps you’re making in honor of leap year? Let me know in the comments.
I never pay full price for clothes unless I’m buying a gift for someone else (and even then, I save if I can.) I know many people buy their clothes on consignment or at closeout stores like Ross and Marshall’s, but I’m not one of them. I always find shopping at these stores to be more effort than it’s worth. Instead, I stick to stores I trust.
Major department stores always have clothes on sale, but you can also find deals at the boutique chains if you know when to shop. Here are my tips for finding discount clothes:
Discount Women’s Clothing
I generally wear clothes from one store: Ann Taylor Loft. They’re well-made, they fit me, and they last a long time. Because I’m loyal, I never have to pay full price. In addition to shopping their sale section twice a year to refresh my seasonal items, I also receive regular discount emails. If you don’t receive discount emails, sign up at their website or look for coupon codes.
Here’s the trick: Shop only at a store with online shopping and in-store returns. Buy enough to qualify for the highest discount possible and receive free shipping. Then return what you don’t like to the store. In the fall, they also offer $25 off a purchase of $50 coupons. If you watch the dates, there’s usually a slight overlap between the start of the offer period and the end of the discount period so you can buy clothes at a discount and still receive the coupons.
Discount Baby/Kids Clothing
Target is the first choice for young parents. Even at full price they’re cheap, but they frequently have sales. When the price ends in a 4, snap it up. That’s the lowest it will go. Wise Bread offers additional tips for shopping smart at Target.
I’ve also spotted great prices and sales at Old Navy. Kids grow fast, so there’s no reason to spring for the pricey duds. However, if you like expensive clothes, watch Craigslist for warehouse and consignment sales like the one in Los Angeles. These happen all over the country and I’ve seen reports of moms buying $50 Gymboree outfits for $5.
Discount Seasonal Clothing
Did you ever wonder why department stores put clothes on the floor months before you want to buy them? It’s actually a century-old practice. Back in the late 1800s and early 1900s, clothing had to be ordered in advance. The wealthy would travel to Europe in the fall to buy their clothes for the spring. Although we don’t do that anymore, department stores still buy their clothes two seasons early, which means they hit the floor at least one season early.
In general, the clothes will already be on sale if you wait until the proper season to buy them. You can save even more by buying your clothes a year early. If you’ve worn something out by the end of a season and you want a classic replacement, buy it at the end of that season and save it for next year. For example, you can score cheap winter coats in March. Always stick to classics when buying early. Trendy items will probably be out of style by the time you pull them out of the closet next year.
Shoes are another area where it’s easy to save big. I buy them from shoe warehouses and I buy them late in the season to save as much as 50% off retail. For example, I recently bought two pairs of boots. The original price was $70 each. The warehouse price was $40 each. Because it was late in the season, they were 30% off. I then used an additional coupon. I bought both pairs of boots for $55 with tax, and received a $5 coupon for next time.
Discount Men’s Suits
Items like suits can be expensive, but you can still shop wisely. We’ve found that it’s best to avoid the uber-cheap suits. They wear out quickly, which means you replace them more often. Instead, we shop the semi-annual men’s sale at Nordstrom, big suit sales at Macy’s, and local suit discounters like 3-Day Suit Broker. We buy high-quality name brand suits for 50% off retail. When shopping for suits, look for super 100 or 120 wool. Although the higher grades sound better, they actually wear out more quickly.
These strategies save me at least 30% off my annual clothing budget. I buy clothes that will last a long time, which also keeps my spending down. If you have other strategies for saving money on clothes, let me know in the comments.
I love to work out at the gym, but that option isn’t for everyone. The gym is expensive and easy to avoid. If you want a cheaper option and need motivation to get in shape, form a frugal exercise club with nearby friends. You have several fitness options:
Walking Club: A walking club is the easiest and cheapest. You can ask several co-workers to take lunchtime walks with you. Plan a variety of routes to avoid boredom. Telecommuters or stay-at-home parents can probably find neighbors to walk with during the day. Walking with neighbors not only provides a social outlet, but knowing you have someone waiting for you forces you to take a much-needed break from your work.
Free Fitness Classes: Many community centers and parks offer a few free fitness classes every week. A yoga teacher offers free daily classes at a park near me. He does accept donations, but they’re not required. Once you find a class that looks interesting, ask a couple friends to attend with you.
Group Exercise at Home: Outdoor exercise isn’t always possible, so you could pool your resources to buy a couple workout DVDs or take turns borrowing them from the library or a rental store. If one of you has cable, check the on Demand menu. Clear a space in someone’s living room or basement and follow the DVD together. Avoid any video that calls for equipment, unless you’re all willing to buy plastic steps and free weights.
Weekend Exercise Club: The Los Angeles area offers ample hiking and other outdoor activities. You probably have many options near you, too. If you’re not sure where they are, borrow local activity and hiking guides from the library. Note some good possibilities, and then ask your friends if they’d be interested in trying them with you. To form our group, my friend created a three-month schedule with hikes, kayaking, yoga, and other activities. She sends weekly reminders of the weekend activity to find out who can attend. I also marked them in my calendar so I know to plan for them. Most of the options are low-cost, which works well with our budgets. At the end of the three months, we’ll plan the next three months. This plan works especially well for areas with good weather year-round, but you can substitute indoor classes if you live in a region with harsh winter weather.
Outdoor activities club:
If your friends won’t join you, find a formal club. The Sierra Club is active in many areas and frequently holds hikes and other activities. Most are free, but some require fees. Once you attend, you may meet new friends who are willing to branch out. You can also check the calendar at local wilderness areas for ranger-led hikes. If you prefer other outdoor activities, ask a local sporting goods store for information about local clubs. You can also Google the name of your city or region and the name of the sport, like “Los Angeles bicycle club.” I’ve always wanted to try orienteering, which is hiking with a competitive goal.
Online exercise motivation club: If you can’t find anyone to work out with you, email long distance friends or relatives to form an online motivation club. Simply knowing that you have to email your progress and activities to friends might be enough to get you off the couch.
Even if your friends are a bunch of couch potatoes, you can probably entice them to form an exercise club with you. Once you all get out there and get moving, it will quickly become a regular habit.
Gee, it seems like just last week the carnival was in town and now it’s back already.
I enjoy seeing movies, but it costs a fortune to visit the theater. To save money, I came up with nine legal tips to save money on movies. But first, the backstory, which every good movie has:
Where I live in Los Angeles, the lowest priced movie theater is $12. If I want to drive a little further, the price falls all the way to $11. It’s practically a bargain (if you live in crazytown.) For this reason, I rarely see movies in the theater. I believe the last movie I saw was Harry Potter, sometime last summer.
On top of the cost, I just don’t want to take the time to drive to the theater, fight for parking, sit in the theater for well over two hours, then drive all the way home. On top of that, it seems like the 8 or 9 PM movie is dead. Instead I’m stuck with 7:40 or 10:15. One is too early for dinner and one gets out really late.
But, of course, I still want to see movies. Without further delay, here are my tips:
Find a bargain theater. Most areas have one or two bargain theaters. These are “second-run” theaters showing movies that are probably already on DVD. The upside is that tickets are usually less than $5. The downside is that the sound and seats aren’t so great. If you must have the big screen experience, this is the way to go, but it’s not my personal favorite. A commenter on another blog I read (and I’m so sorry I forgot which one) suggested visiting university theaters, but most of the universities near me limit their screenings to students and faculty.
Join Netflix or Blockbuster Online. One reason I rarely see movies in theaters is the 190 movies on my Blockbuster list. I call it the tyranny of Blockbuster, but it is nice to get movies mailed to my home. During the summer, we can usually get through three movies a week. We pay $20 a month, so that works out to $1.66 a movie. We especially like having the ability to start and stop the movie or to watch it any time of day.
Attend matinees. These days it seems that matinees aren’t that much cheaper than evening films, but you can save a little money if you’re willing to go to the first showing. Make sure you avoid the snacks, though. My trick is to carry my big purse and bring in my own bottle of water and bag of candy. This works better for adults than teens.
Watch movies on Demand. If you have cable and a digital box, you may have a small selection of free movies. Skim through it to see if there’s anything decent showing. I have one pay channel, so I occasionally watch movies from its on Demand menu. I’ll continue to do so until I can finally convince my husband to cancel the channel.
Rent from the library. Most libraries carry a selection of first-run movies. The one drawback to my library system is that they won’t send movies through interlibrary loan. The selection at my library is limited, so I’ve never rented from there, but I hear that other systems will send movies between branches. If you’re looking for a foreign language film and live in a big city, check a branch in the neighborhood where that language is common.
Buy previously viewed movies. Personally, I don’t understand why people buy movies, but if you like to own them, wait until they’re on sale at the video store. You can usually pick them up for less than $5. You can also try Amazon, eBay, and Half.com, but consider the shipping cost before making the purchase.
Find a bargain rental store. Many neighborhoods have bargain rental stores. If you can wait a few months, you can often rent the movie for $1. This was dicey during the VHS days, but DVDs retain their quality well.
Join movie theater clubs. If you really want the theater experience in the evening, see if the theater has a movie club. Each time you buy tickets or concessions, the club gives you points. Eventually you’ll earn free popcorn, drinks, candy, and tickets.
Use Entertainment Book coupons. If you buy an Entertainment Book, look in the back for the movie ticket coupons. Usually you have to mail away for the passes, but they save at least 25% on the tickets, sometimes more.
Bonus tip: Join an entertainment guild. All you have to do is break into the movie/television industry, become eligible for one of the entertainment guilds, and then receive your membership card. That card will get you access to free movies during awards season. If you want to see free new releases at home, then work even harder to join the Academy of Motion Picture Arts and Sciences. Sure, you’ll have to put up with long hours, unreliable employment, and Hollywood’s self-importance, but you do get to see the free movies during Oscar season.
I think I’ll stick to the first nine tips. It’s just easier. What are your tips for saving money on movies?
Many people confuse money market accounts, money market mutual funds, and certificates of deposit. Although all three are considered the safe investments, they are not the same thing. Carefully consider all three before choosing the one that is right for you. In this post, I define each.
Money Market Account
A money market account, also called an MMA or a money market deposit account, is a savings account. These accounts are offered by banks and credit unions, but they are also used as holding accounts by brokerages until you use the funds to buy securities. Money market accounts offer these features:
- Slightly higher interest rate than savings or checking accounts
- FDIC-insured to $100,000 (or similar private insurance)
- Higher minimum balance than traditional checking or savings accounts (unless the account is part of a brokerage account)
- Limited withdrawals (usually a maximum of six/month)
- Limited check-writing privileges (usually a maximum of three/month)
In addition, if your account isn’t held at a bank or credit union, you may only be able to make deposits by mail, wire transfer, or electronic transfer.
Money market accounts are a safe place to keep savings, but also offer limited access. This might be good if you’re prone to nibbling away at your savings.
Money Market Fund
Money market funds, also called money market mutual funds, are fixed income investments sold in shares valued at $1. They are not savings vehicles. Money market funds invest in the cash market. In general, it means they buy very short-term debt securities, which banks, large corporations, and governments use to meet short-term cash needs. Short-term means maturities of less than thirteen months.
The amount of cash needed to invest in the cash market directly is so large that individuals can’t do it. Instead, money market funds pool the investments of thousands of people in order to buy these securities. They generally share the same features:
- Average maturity of less than 90 days (required by the SEC)
- Not FDIC protected
- Low return
- Low risk
When considering money market funds, you should also consider the expense ratio. As with any other mutual fund, the fund company charges expenses against the yield. An average is .28%. You should also review a prospectus before investing the money to make sure they choose investments you feel comfortable with. Each fund will hold a variety of short-term securities with different maturities, but the average maturity will be less than 90 days.
You can choose to invest in both taxable and tax-free money market funds.
Certificates of Deposit
Certificates of deposit are another very safe savings vehicle. They are also called time deposits, and are offered by banks, credit unions, and some brokerages. Maturity date range from three months to ten years. Each CD specifies an interest rate when you buy it. You can buy a CD in any amount, but most banks require a minimum. Banks also offer “Jumbo CDs” for deposits over $100,000. In general, higher deposits and longer terms receive higher interest rates. Most CDs share these features:
- FDIC-insured up to $100,000 (or similar private insurance)
- Steep penalty for withdrawal prior to maturity
- Fixed interest rate during the term
- Limited window to withdraw funds after maturity. If you don’t withdraw them, they roll into a new CD at the prevailing rate.
When considering a CD, first make sure that the bank insures its CDs. Next consider both the annual percentage rate and the annual percentage yield. The APR is the stated interest you will earn without compounding. The APY is the total interest you’ll earn with compounding. For example, a CD that pays interest once a year will have the same APR and APY, but a CD that pays interest quarterly will have a higher APY. The APY is the most important number to consider when comparing CDs.
CDs are good savings vehicles when interest rates are high and you expect them to fall. They’re also good if you can afford to have your money locked up for a fixed period of time. You can’t add to a CD, however, so they’re not good for incremental savings. They’re definitely not a place to keep emergency funds. They may be appropriate for college savings if your child will start college soon or is currently in school. Just make sure you choose maturity dates that will give you access to the money when the tuition bill arrives.
Choosing the Right Vehicle for You
When choosing between the three, consider three things:
- How soon you need the money
- Whether you’re willing to accept any risk
- The amount you hope to earn in interest
All three have benefits and drawbacks. Only you can decide whether a money market account, money market mutual fund, or CD is best for you.
Many people treat a tax refund as “found money” or “free money.” What they don’t realize is that it’s their money, and always was. The money was an overpayment of taxes owed, which the government was happy to receive as an interest-free short-term loan.
Once you start thinking of your tax refund as a portion of your income, and not as free money, you’ll rethink the way you spend your tax refund. Rather than wonder, “Why is my refund so low,” you’ll think, “Yay, my refund is low!”
Five Good Ways to Spend a Tax Refund
Here are my top five ways to spend a tax refund:
- Don’t receive one! The best way to spend your refund is to never receive one in the first place. No, I’m not suggesting you donate your refund to the government. I’m suggesting that you adjust your tax withholding http://www.soundmoneymatters.com/tax-withholding/ to ensure that you only withhold what you owe. This year my husband and are receiving less than $200 from our federal and state tax refunds because we managed to pay almost exactly what we owe. (It was an accident this year, but we intend to do it again.)
- Pay down debt. If you owe any debt, use your refund to pay it down. That’s where our tiny tax refund is going.
- Boost your emergency fund. If you don’t have any high-rate debt, then use the money to boost your emergency fund. Even adding a little bit to an interest-bearing savings account can help you out in a pinch.
- Invest it. The average family receives a $2000 refund. If you’re one of them, that’s a pretty sizable investment. If you were to deposit $2,000 in a Roth IRA at age 35 and average an 8% return, you would net $20,125 by age 65 without adding another cent.
- Spend a little and save the rest. If you’ve been frugal all year long, reward yourself with a nice bottle of wine or a nice night out, then save the rest. Don’t overdo it, but spending $50-$100 is a good way to treat yourself every now and then.
Five Bad Ways to Spend a Refund
I have to admit that I’ve been tempted to waste tax refunds in the past. Especially when I didn’t have any debt – I just spent it whenever I felt like it. Now I know better. Here are five bad ways to spend a refund:
- Blow it on a vacation. Many people use their refunds as vacation funds. There’s nothing wrong with taking a vacation if you can afford it, but it shouldn’t depend on whether or not you receive a tax refund. Instead, adjust your withholding to the correct amount and save the additional money you receive in your paycheck. Simply divide the amount of your previous year’s refund by twelve and deposit that amount into a savings account every month. Even if you only earn $20 in interest, that’s $20 more than you could have spent on vacation if you’d simply used your refund.
- Blow it on clothes. We all need clothes. No one needs a $2000 pair of shoes. Buy new clothes if you need them, but don’t go on a shopping spree just because you got a refund.
- Blow it on a big screen TV or another large, unnecessary purchase. If you wouldn’t buy it without the refund, then don’t buy it because of the refund. Instead, save up for it. If you still want it after months of saving, then go ahead and buy it.
- Fritter it away. Even if you don’t set out to waste it, not having a plan for the money could be just as bad. If you think, “It’s only $10. I got that refund, so it’s fine,” those purchases will add up quickly. You could wind up spending more than the refund.
- Stick it under your mattress. My friend’s father didn’t trust banks (he was from WWII Germany). When he died, his family found over $30,000 in cash tucked away in boxes and stuffed under the mattress. Imagine how much more money he would have had it if he’d put it in safe investments or a savings account.
Now that I’ve shared my tax refund strategies, how do you plan to spend a refund? Have you ever wasted it? Do you have any good ideas for spending it? Tell me in the comments.
As I mentioned yesterday, I prepared my taxes using two online tax software programs this weekend. Yesterday I presented the first of my tax software reviews: H&R Block’s Tax Cut. Today I’ll cover TaxAct Online. If you want to use it, here’s a link to their offer: Do Your Federal Taxes Free
Tax Act Online has been my preferred service for several years. The main reason is because it’s the cheapest one that seemed reputable. I found it through the IRS e-file referral service after inspecting several of the options they recommended. Over the years, I’ve had good experiences with their customer service reps and never had a problem with my returns.
Tax Act Online Cost
You have three options from the start:
- Free Standard Online for $0
- Deluxe Online $9.95
- Ultimate Online for $16.95.
If you also have to file a state return, Deluxe and Ultimate actually cost the same because of the way they tack on the state cost. If you live in an income tax state, you might as well click the Ultimate button just to keep it simple. The Free Standard Online option is only for free Federal returns.
All versions include free online support. The two pay options also include telephone support.
Tax Software Interface
The Tax Act interface has a more formal feel than the H&R Block software. It lacks the soft edges and soothing green colors. The design seems to be focused on efficiency and clean lines rather than comfort.
This is the entrance screen after you register:
The site allows you to save and exit at any time. Once you log back in, this is the screen you see:
Like H&R Block, it also offers the progress indicator in the upper right. This is where they show you what you owe or what you will be receiving back.
Additional help is available below the fill-in boxes. The questions are geared toward the section you’re working on at the time.
If you opt for the paid versions, they also offer a section on Life Events. You click the bubbles for life events that have occurred in the last year, and then the software takes you through a series of questions to ensure that all possible tax implications are covered. For example, if you had a job change and made more than $97,000 total, you may have overpaid your social security tax. TaxAct will check to make sure you haven’t.
Small Business Help
If you have a small business, I recommend using the Deluxe or Ultimate software to ensure you get the detailed help for your Schedule C. TaxAct takes you through a series of detailed questions to properly complete all the forms.
TaxAct is more streamlined and less intuitive than H&R Block. The software is efficient, but you do have to look in a few places for additional help if you need it. I found some of the wording clearer on the H&R Block software, but was able to understand what TaxAct was asking most of the time.
TaxAct uses Alerts to flag any potential problem areas. After you correct an alert, you may not be immediately taken to the next alert, but instead have to click through the whole section. You can avoid this by using the top navigation to return to the alerts, but it is annoying. Once you complete the alerts, you’re then offered an opportunity to check them one more time.
I also wasn’t able to find anything on the site that indicates that they provide audit support should you be audited.
Use or Don’t Use?
As I said, I’ve been using TaxAct Online for years, so obviously, I’m a fan. I’m comfortable with online interfaces and know how to use them. I don’t need much handholding. TaxAct does offer an online tour for first-time users if you’re not comfortable with the process.
Overall, I find the TaxAct software to be much more affordable and I’m impressed with the wealth of information available for the low price. I feel that TaxAct may be more thorough than H&R Block because of the Life Events section.
Final Tip: Whichever program you use, always print the return and review it before filing. This year, I discovered I had incorrectly entered some small business income in two different sections, which increased my income. Correcting that saved me some money!
Here at Sound Money Matters we celebrate all manner of holidays. This week it’s Blog Carnival Day. This holiday honors two blog carnivals:
The Carnival of Personal Finance #140 at The Financial Blogger. In addition to my post on whether you should pay off debt or save for a house, you’ll also enjoy a real estate agent’s perspective on the same topic.
And the Festival of Frugality #113 at Mighty Bargain Hunter. If you liked my post on freezing bread, sauces, and herbs, you’ll also enjoy this tip on making expensive dairy products with lower cost version.
Happy Blog Carnival Day!
This weekend, I did my taxes using two online tax software packages. I’ll post tax software reviews for each today and tomorrow. Today I’ll start with H&R Block’s Tax Cut Online. I was fortunate to win a free federal return from The Digerati Life, but anyone can use the software for free. You won’t be able to print out and review your turn without coughing up a credit card, though.
I’ve been using online tax software for about ten years now, so I have experience with these programs. I started with Web Turbo Tax, then went in search of other programs when I lost free access to that. This was my first time with Tax Cut Online.
Tax Cut Online Cost
You have three options from the start:
- Basic + e-file for $14.95
- Premium + e-file for $19.95
- Premium + State + e-file for $49.95.
The latter two include on Ask a Tax Advisor session. All three come with their Worry-free Audit Protection.
Tax Software Interface
I really liked the gentle interface. It was welcoming, comforting, and easy to use. Everything was clearly explained and information or answers were easy to find. It was a very intuitive program.
This is the entrance screen after you register:
The site allows you to save and exit at any time. Once you log back in, this is the screen you see:
I found the design welcoming and comforting. It is branded in the H&R Block colors, but in a soothing palette. My favorite feature of any tax software is the progress in the upper right. This is where they show you what you owe or what you will be receiving back. H&R Block also shows you the most common questions related to the section you’re working on in the right-hand pane.
They ask questions in a basic format, as you can see in the filing status question:
In some sections, such as your wage and withholding information, you can watch a movie about the section. They also provide a list of all the documents you need to gather:
Small Business Help
If you have a small business, I recommend using the Premium software to ensure you get the detailed help for your Schedule C. H&R Block takes you through the detailed questions to properly complete all the forms.
Although I found the H&R Block interface easy to use and the software was detailed and accurate, there were three aspects that were off-putting
- A request to use my information to sell me other services
- An offer to have a pro review my taxes
If I’m entering detailed personal information into their tax software, I don’t want them using it to sell me other products and services. I checked the “no” box, but I was still very annoyed that they even asked.
At another point during my return preparation, the software offered to have a pro look at my return for an extra $50. If their software is that good, why would I need to have a pro review it? I’m certainly not going to pay someone to push the “send” button for me.
Edited: As you can see in the comment below, H&R Block doesn’t sell customer information to anyone, so I removed that from my review. They also don’t sell refund anticipation loans in TaxCut (which is good).
Use or Don’t Use?
In all, I found the Tax Cut Online tax software to be easy to use. I didn’t however, feel that it was worth the extremely high price once the state software was included. I was also very turned off by the shilling for their loans and other services during the process.
If you want to use a name-brand and are very concerned about being audited, then Tax Cut Pro may be good for you. If you live in an income tax state, then I would use a different service. Tomorrow I’ll review TaxAct Online, a good alternative for personal and schedule C forms.