What to look for in Tax Preparation Software

Tax day is right around the corner, and the tax forms are flowing. In the next few weeks, most of us will receive W-2’s, I-9’s, and a slew of other “bingo” sounding forms. Now more than ever, people are turning away from accountants and tax preparers and making the move to tax preparation software to do their own taxes. Not only can tax preparation software make doing taxes cheaper, but it can make the job easier as well.

There are many options to choose from. How do you choose if using tax preparation software is for you? If you choose to use a program, how do you choose which software solution offers what you are looking for? The questions in this article can guide you as you decide whether tax preparation software meets your needs.

Advantages of using tax preparation software:

TurboTax, Tax Act, TaxCut, and other tax preparation software programs typically save the user both time and money. Much like consulting a tax professional, using a program to do your taxes can help your return be accurate, help you find deductions, and help you keep your records for future use. Tax software can also help you simplify complicated returns and process online refunds.

Benefits of tax preparation software:

Time Savings. Tax preparation software can handle the calculations necessary to file your taxes. Most programs feature an interview or outline to a return that walk you through your situation to ensure you fill out the right forms or schedules. Also, if you use a software program, you will have access to all of the latest forms and documents from the IRS. These forms are updated automatically by most software programs.

You can save money. Tax preparation software varies in cost from program to program, but most are between $30 and $70. Compared to the cost of a tax consultant, this is quite reasonable. Preparing a return with the help of a service or consultant often costs over $200.

In addition to spending less, tax preparation software can help you find tax savings and deductions you might not have found on your own. This can often save the user hundreds of dollars.

Accuracy. With tax law becoming steadily more cumbersome, it is easy to make mistakes if you are doing your own taxes. The complex calculations and considerations necessary to process the simplest of returns can leave room for error. Tax preparation software does all of the calculations for you, thus eliminating errors. The two largest programs, TaxCut and TurboTax both offer guarantees that the calculations will be correct.

With tax preparation software, you can also import previous returns to simplify data entry. Your files are also stored electronically for easy archiving. Both of these features help you stay accurate on future returns.

Which Software is Right for You?

There are three big choices in tax preparation software: TaxCut, Tax Act, and TurboTax. They all offer similar features but differ in subtleties. Consider the following when deciding which program is for you.

What type of computer do you have? Currently both TurboTax and TaxCut is offer an Apple OS X version and a Microsoft Windows Version. Tax Act however is web based, so it is will run on any operating system. Also, be sure to check the system requirements of the program to make sure your computer has enough power.

How complex is your return? Some individuals have very complex tax situations that include corporations, trusts, and partnerships. Others have more simple situations that require only the most basic of tax forms. Tax preparation software is the same. If you file the short form (EZ) or the long form with both standard or itemized deductions, then any program will work. If you have a more complex situation with complex investments, multiple schedules, or business ownership, stick with TurboTax or TaxCut. Their interviews and complete form libraries will best be able to meet your needs.

Both TurboTax and TaxCut offer extensive help functions that can help figure out specific situations or explain tax law. Even the most basic knowledge of tax law can be supported by the extensive help libraries.

What Should You Look for in Tax Software.

Most established tax preparation software companies offer demonstration version of their programs. Check these out before buying. The fact of the matter is that tax law is the same regardless of what program you are using. How the tax law is presented and supported makes a world of difference in the mind of the user. What should you look for in the software.

Is the product simple to use? Is data entry confusing or simple? Can you easily navigate through the different menus, reports, and forms?

Is it user-friendly? Was the software built for you or for a tax professional? If a program uses jargon or non-friendly vocabulary, it is useless to you.

What other perks does the software offer? Many programs offer add-ons such as tax planners, will creators, budgeting software, or even organizational software. These perks can often offset the cost of your tax preparation software and make the purchase less painful.

How much does it cost? Don’t pay for what you are not going to use. Many products offer more “bells and whistles”, but these come at a premium. Do not pay for electronic filing or a state module if you are not going to use it. Also, don’t buy a business version if you are basic user. The companies will try hard to up-sell you to other features. Make sure that you need what is being offered.

Is there a rebate? Many software companies and most big box retailers offer rebates and purchasing perks for their tax preparation software. Take advantage of these. If you have already decided to buy the software, why not get something for free. Make sure to shop around at the different retailers to make sure that the deal you get is the deal you want.

Tax day is looming, but you shouldn’t panic. Today’s tax preparation software tools are better then ever and can make doing your own taxes both painless and economical. Make sure to be prepared and do your research before you take the plunge and purchase your software.