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Which Tax Prep Software Program Should I Use?

Thursday, February 2nd

Which Tax Prep Software Program Should I Use?

When tax season comes, as it does every.single.year, many people find themselves wondering how they should prepare their returns. Sound familiar? Especially if you're filing them for the first time - maybe you never had income before, or Mom and Dad always took care of it in the past - it can be confusing to figure out where to start. But, there's no need to worry: there are plenty of options for preparing your taxes that won't break the bank or leave you overly stressed out.

To begin, here's a bit of friendly information: paying an accountant or professional tax preparer is both costly and probably unnecessary, unless your finances are more complicated than the average taxpayer's. If your income is fairly straightforward, you don't have millions of dollars in investments, and you don't own property around the world, chances are good that you can file your own taxes online with an affordable, easy-to-use tax prep program. That's good news, considering that even the simplest tax returns can cost $100 or more if you have them prepared professionally!

So, now that you know you don't have to hunt for a financial professional near you, which tax prep software should you use? Here are several things to keep in mind as you consider your options:

  • How complex is your tax situation? If your only income is reported on a W2 and you rent instead of own, most tax prep platforms will let you prepare and file your federal return for free. (Yes, free.) On the other hand, you'll probably need to pay for an entry-level package if any of the following apply: you own a home, you have an HSA, or you plan on itemizing your deductions (e.g. charitable contributions, education or childcare expenses). Premium tax prep software will likely be required if you have income from freelancing, stock sales and/or rental properties. Or, if you're fully self-employed, plan on needing the highest level of service; the good news is that even this package is usually available for $150 or less.
    Make sure the tax prep platform you choose offers the level of service you anticipate needing for your return.
  • Do you want the option of getting help from a tax professional? If your return is likely to be easy, you might not need to ask any questions before sending it in to the IRS. On the other hand, if you think you might want a consultation or you'd just like the peace of mind that comes from knowing that an accountant or other professional is available if you need one, you'll want to choose a tax prep option that offers that service. Some may give you as-needed access while you work on your return, or you can pay to have your paperwork checked by a CPA prior to submitting it to the government.
    Also, if you'd appreciate knowing you can get face-to-face help locally if you get stuck while preparing your tax return, there are a handful of tax prep software programs that give you access to that as well.
  • Which provider offers the best overall customer experience? Once you've worked your way through the first two questions, it really comes down to service. Most tax preparation options give you the same features, maximum refund guarantees, and at roughly the same price for each package tier. But, if you look at what clients say about each provider, you'll often see some clear differences. Choose a tax prep software program that has the features you need and the most positive feedback from people who've used it in the past.

At this point, your list of remaining options will likely be like choosing between Coke and Pepsi or iPhone vs. Android: personal preference, family tradition or habit more than anything else. You can rest easy knowing that you've chosen a tax preparation platform that will give you the guidance you need to file your taxes accurately and inexpensively.

(P.S. Keep track of what you spend for your tax prep software program. You can enter it on your next tax return as an expense!)

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Tax Preparation Service FAQ

Online Tax preparation services walk you through a series of questions, much like you'd get with a human tax preparer: are you married, do you have a mortgage, and so on. The program fills in your tax forms based on the answers you provide, and at the end your return is ready for filing. Tax preparation services allow you to file your returns electronically, but you always have the option to file them by mail.
That's up to you! Almost every tax preparation platform today makes it possible to do your entire return online, no downloads or CD-ROMs necessary. But, if you prefer to do it the more old-school way, you can still find tax preparation services that download to your computer and let you work offline.
That depends on several factors. The more complicated your financial situation, the more likely it is that you'll need a tax preparation service that goes beyond the basics. Most tax preparation services will walk you through the options and recommend the right product for your needs.
Yes, most of the time. Many services will take the information you entered during your federal return and carry it over into your applicable state return. Keep in mind that you may have to pay extra for your state's online tax service. You can opt to file your federal return electronically (often included at no extra charge) and file your state return by mail if you wish.
For the most basic tax returns (those that only have W2 income, no investments, no mortgage interest to deduct), some tax preparation services are completely free. Otherwise, you can expect costs ranging from $19 - $120, with the most expensive packages for those who have self-employment/business income and expenses to report.
You'll often find answers built right into the tax preparation service. Look for a button to click on the page where you're having trouble, for explanations and additional info. If you'd like to get help from a tax professional, you might be able to connect with someone by phone or online (though that may incur extra charges). A few online tax preparation services have in-person options if you get stuck and want a tax preparer to take over or just want to go over your return face-to-face.
The good news is that your tax preparation service will likely have a robust detection method for uncovering any errors you may have made. Of course, it can't tell if you entered the wrong numbers for your income, but if it spots anything obviously wrong you'll get a notification and a prompt to review that part of your return. If you file your taxes and later realize there was an error, you can file an amended return.
Getting an audit notification can be scary! Depending on which tax preparation service you use, you might have audit support and guidance built into your package. Some services also offer full audit representation for an additional fee.
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