Doing your taxes can be nerve-wracking, especially if you’re not familiar with the paperwork or if you don’t use an online service. It’s easy to panic: what if your refund is higher than it should be? Could the calculations be wrong? Will the IRS come after you?
For a handful of the 129 million Americans who are ready to file their taxes before the April 15 deadline, the way to calm the anxiety is to prepare their taxes twice — once through, say, TurboTax and once through H&R Block – and compare the results before actually filing the application with the IRS.
But according to Bill Harris, founder of fintech Evergreen Money, this isn’t necessarily a good idea.
“I don’t think it’s worth people trying to calculate their taxes with two different tax software,” he says.
This is because all major tax preparers generally operate the same way. They may have distinct ads, websites, and tools, but at their core they are identical.
“The IRS code is the IRS code,” says Harris, who ran TurboTax for much of the 1990s and later served as CEO of PayPal. “Now, it’s somewhat subject to interpretation when you get to very, very complex documents, but for documents that most of us will do as individuals – and without esoteric investments – it’s all cut and dry.”
If different tax preparation sites produce different tax returns, the most common explanation for the discrepancy is user error. You may get different results from different tax preparers if you enter a number incorrectly while typing. It could also happen if you include personal information (such as a dependent) or a form (such as a 1099-INT) on one website and not the other.
Soon, however, this may be a problem of the past.
Filing taxes directly with the IRS
This year, the IRS is actually testing its free tax preparation tool, called IRS Direct File, in 12 states. The hope is that in the future it will be expanded to all taxpayers in all states, which could give Nervous Nellies the peace of mind of knowing they are paying their taxes correctly because they are preparing them directly with the IRS rather than a third party. party.
It’s also worth noting that you probably don’t run a huge risk of the government knocking on your door to scold you if you make a tax mistake. Even though the IRS is spending a large chunk of its controversial Inflation Reduction Act funding on law enforcement, the agency has vowed that it is cracking down on wealthy tax evaders rather than ordinary Americans.
In fiscal 2022, the overall odds of being audited were 0.38%, according to the Transactional Records Access Clearinghouse. The vast majority of these were mail checks, meaning the IRS simply sent letters to people requesting more information about their taxes (i.e. you probably don’t have to worry about a surprise visit from a handcuffed agent) .
In fact, Harris says, if you’re unhappy with your refund after paying taxes, it’s smarter to investigate the causes rather than blame the software. Ask yourself: Are you contributing enough to your 401(k)? Do you have a Roth IRA? What is your investment strategy?
Harris says this type of tax planning can ultimately save you thousands of dollars.
“Don’t waste your time chasing a small amount of money in a very unlikely situation [by doing your taxes twice],” he says. “If you have all this time, think about structuring your financial life a little more optimally.”
More from Money:
Here’s how to track your tax refund online
2024 Tax Changes: What’s New for Filing Taxes with the IRS This Year?
How to File Your Taxes for Free This Year