Income Tax Preparation Software

What to look for in online and disc-based tax prep software

Income taxes are an annual chore that many individuals and businesses wish they could do without. The IRS itself is trying to reduce the amount of paperwork it must deal with and so is encouraging taxpayers to file their returns electronically. The latest versions of tax return software feature the ability to file returns online through the user’s Internet connection, while many tax preparation software vendors now offer the entire tax preparation process online.

Income tax preparation software is also made for corporate accounts and professionals who prepare taxes for others. Tax filing software for the home user typically features a friendly question-and-answer interface to put the user at ease, while professional tax preparation software accepts information in a more businesslike format. Both versions of income tax software offer packages targeted to specific taxpayer levels (basic, home business, partnerships, corporations).

Using income tax software offers the following advantages:

1. Comprehensive coverage of the income tax code as it applies to the taxpayer using the package, with the ability to identify possible deductions of which the user may not have been aware.
2. Elimination of errors in calculations and reading tax tables.
3. The ability to plan for future years.

 

Choose income tax preparation software targeted to your needs

Not everyone's taxes are the same. Single taxpayers with one source of income and no itemized deductions need very little in the way of tax prep software support, while married filers with multiple income sources, dependents and who donate to charity on a regular basis have more complex needs.
Try: TurboTax comes in Basic, Deluxe, Premier and Home and Business editions. (Deluxe is for filers who donate to charity or have significant childcare or medical deductions, while Premier is for rental property owners or estate and trust beneficiaries.) TaxCut also offers several levels of features, including bundles of its Premium level for filers who do and don’t have to file state returns. TaxACT offers business tax software bundles targeted to business partnerships, S-corporations and C-corporations for both home-based and office-based businesses.

Choose income tax software with outstanding features and support

Great tax software comes with powerful features such as interoperability with other software packages and an easy-to-use interface. When that isn't enough, technical and educational support provide answers to problems and instruction on getting the most out of the software package.
Try: The computer software and online versions of both TurboTax and TaxCut allow users to import data from previous editions of their own and competitor’s products. In addition, TaxCut offers audit support for e-filers from an experienced H&R Block agent. In professional tax preparation software, Lacerte’s products integrate with QuickBooks and other Intuit products; the company offers training as well as links to Intuit’s online accounting website. GreatTax offers detailed, customizable reports and the backing of industry leaders with a half-century of experience.

Go with online income tax preparation software for greater convenience

Web-based tax preparation software offers many of the same features as disc-based software, without the hassles of having to purchase discs and download updates before you can complete your return.
Try: FreeTaxUSA offers its services free to taxpayers who meet its income and state of residence requirements and charges a nominal fee to those who don’t; most returns can be filed in half an hour. TaxExact divides its online services into Gold, Silver and Bronze levels according to the complexity of the return, but offers free filing of state income tax returns. TaxACT also offers an online filing site.

 

• Evaluate features as well as price before you buy. Some tax prep software offers a low initial price, then adds charges for extra features (such as filing state tax returns), while other vendors charge more initially but offer more comprehensive services and information.
• Choose online income tax preparation software that uses secure socket layer technology to keep your information safe when you e-file. SSL software displays a small padlock icon on your browser.
• Organize your tax records before you sit down in front of the computer. You'll save time entering your data if you don't have to find it first.

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