Your Ultimate Guide to Compare Tax Software
Many of us dread tax season because it makes us feel uneasy and unprepared. It seems that even though we must file tax returns every year, it still surprises many of us by how quickly we go from January to April. Once I get my 1099s, I know I have to start preparing for my taxes, but the next thing I know it's March and I have not done a thing.
When you find yourself searching for receipts at the last minute, it can get stressful. You can do yourself a big favor by saving receipts throughout the year and knowing how you are going to file your taxes. Many of us file our own taxes but probably do not feel good about it, mostly because we feel rushed.
If you start early, before the end of January, and compare tax software, not only can you select the right one for you, but you could get a significant discount on the software.
What Is Tax Software?
I do not know about you, but I remember the days of doing taxes manually with a form and a pencil. Tax tools have come a long way in a short amount of time and we all should be grateful for that. You always have the option of taxing your taxes to a professional and letting them handle it. However, you also can do your taxes yourself and if they are simple enough, you probably should. You may be able to save a significant amount of money by using tax software.
Before we talk about all the various ones and compare tax software, let me explain a little more about tax software.
Tax software is a system that you can find online to help you prepare your personal and business income taxed. Believe it or not, if you have a professional file your taxes, they are using the same software you can use at home. Tax management has come a long way and you can do so much of it for yourself.
Long gone are the days of an actual form and a pencil, now you input all the information into this software that you download on to your computer. This software handles all the math for you. Let's be real for a moment, computers churn through math and equations much better and faster than any human can. This helps you to eliminate any errors you might make by doing the math yourself.
Once you have completed all the forms online, the software offers an additional check, for a fee, to ensure your return is audit-proof. After you are satisfied with your return, you can file it electronically. You can also handle all payments right from your computer at the time that you file.
The Top Tax Software Is Turbo Tax
There are quite a few different tax software available to you, so to ensure you are using the best one, you should compare tax software. The best one available to you, and quite possibly the one you hear about often, is Turbo Tax.
Expensive, but with a Promise of 100% Accuracy
While this is also one of the best you can find, it is also one of the most expensive on the market. When it comes to filing your taxes, you may not care about the cost because you are looking for the one that promises the most accurate return.
You do not have to have any experience with taxes to use Turbo Tax. It is simple to use and has a question and answer form. It has support and help at every step along the way. You never feel like you are doing your taxes alone. They have a promise that they are 100 percent accurate. If they make an error, they pay all fees and interest. For an additional fee, they offer audit support. Even though there is a fee, it is much less than you would pay with a Certified Public Accountant (CPA).
Within Turbo Tax, there are many different options for you. Each one comes with its own price tag, but depending on your needs, you are sure to find one that is right for you.
Free Edition
That is perfect if you earned less than $100,000 from only one employer and do not want to itemize. This allows you to file a 1040EZ.
The Deluxe Edition
It allows you to file federal and state taxes (each with a separate fee) and can file any 1040 with itemized deductions and several sources of income over $100,000.
The Premier Version
This version does everything that the Deluxe version does, but can also accommodate investments, rental property, stocks, bonds, and other types of investments.
Premium Version
Turbo Tax also offers business versions with their Premium version for those who are self-employed. This version helps you to create 1099s, if needed and can integrate with Quickbooks.
The Business Version
It is great for partnerships, S and C corporations, and LLCs.
The Live Version
This one can be added on to any Turbo Tax you buy and this involves a CPA. This person can also access your computer screen to see where you might be stuck.
Coming in as a Close Second Is H&R Block
When you want to compare tax software, H&R Block is a close second to Turbo Tax.
Equipped with a Lot of Professionals
H&R Block has many offices set up over the country to provide you with a huge network of professionals to help you at any time. You are able to interact with, or switch over and let the professionals finish your return at any point while using the software. There may be an additional charge for those services.
Similar to Turbo Tax, H&R Block offers many different options, all coming in at a different price point. H&R Block provides you with a prep list that helps you gather all the documents you need to file your taxes.
More Zero
It is the free online version is for the 1040EZ, but can handle various tax credits. You can file federal and state taxes, each with their own fees. It comes with technical support via a chat. This version can handle more complicated situations than its competitors free version.
The Deluxe Version
This one is best for the more complex returns, including itemized deductions and health savings accounts. You also receive unlimited advice via chat.
The Premium Version
This version adds in the ability to include capital gains and losses, income from rental property, and contractor income with expenses under $5,000.
The Self Employed Version
It is great for small businesses with small business expenses, like home office, depreciation, and vehicle expenses.
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TaxAct Should Not Be Overlooked
When you want to compare tax software, TaxAct may be one you do not consider, but should. Do not overlook this tax software.
Simple and Less Expensive
It is inexpensive as compared to the others. It even offers a price-lock promise. They charge you the same amount no matter when you file, as long as you file before the deadline of April 15. This program is much simpler and can handle some self-employment and investments, but may not be the right option for you if you have complicated taxes.
‘Life Events’ Feature
TaxAct offers a feature called Life Events to help you find situations that changed in the past year, such as buying a house, having a baby, or even losing your job, that may provide you deductions. The downside is this software will not add that into your return. You have to do that yourself. They do provide a promise of 100 percent accuracy and the maximum refund. Otherwise, they refund the price you paid for the software, pay the difference of your lower refund or higher tax liability, and any legal costs or penalties, up to $100,000.
They also provide Audit Defense. They have several different versions from which you can choose.
TaxAct Free
This one is for the 1040EZ and allows you to file federal for free and state income tax at a nominal fee.
Basic
It can be used if you have dependents or retirement income. However, it is not intended for investment income or itemization.
Plus
This version is great for homeowners, investments, and itemization.
Freelancer
Perfect for independent contractors and self-employed people.
The Premium version
Everyone can use it, including self-employed and those with investments. They also offer business return options for additional fees.
Liberty Tax
When looking to compare tax software, Liberty Tax may not be at the top of your list, but it has some advantages.
Many Tax Professionals Available
Similar to H&R Block, Liberty Tax has a large network of office and tax professionals available to you. You are able to start with the tax software and switch over to a professional, if you need help. Liberty Tax has a mid range price point but offers a high-level service.
They also have several different options from which you can choose.
Simple Version
It provides you with chat and tech support and handles the simplest tax returns. It can handle child and dependents and non resident taxes.
The Basic Version
Best for slightly more complicated situations, like the 1040 form. It can handle itemization, interest and dividends, small amounts of self employment and business expenses.
Deluxe
This one is best for those who are self-employed and have dependents. It includes a Schedule C and home office deductions.
The Premium Version
Everything you need. It includes everything that all the above options have plus rental income, capital gains, profits and losses. It can even handle the sale of a home.
Jackson Hewitt
The last option you should consider when you want to compare tax software is Jackson Hewitt. This is a slightly less expensive option but gives you just as much in return. This software offers a wizard that walks you through filing your return step by step. It asks you questions and your answers dictate which type of return you file. The wizard covers every scenario and you do not have to figure out which version you need. It does it all for you.
This software handles complicated tax returns, but it may not explain why it has made the choices it made. It does provide help links and live support. They also have offices that you can visit if you get stuck and need help. They also offer a free version for easy returns, when you need to file a 1040EZ.
Some Quick Tax Basics
Now I would like to remind you of some basic tax information. Most likely, you know this or have some awareness of it, but I think that it is always a good reminder.
What Are Taxes
A tax is a fee imposed on you by the government. This can be a fee for purchase goods at a store, or receiving items from a deceased relative. You are charged this fee on money that you earn while working and extra winnings, such as the lottery. Most of us are a little bitter about paying taxes, but we quickly forget that is how programs are funded.
Why We Pay Taxes
Those programs can be as massive as the Defense Department, which funds the military, or it can be the construction of roads and funding for schools. Any money that the government gives out originates from some type of tax. It is how we pay for items as a country. It is also why many people get so upset when they feel the government is misusing money. However, this does not change the fact that you are legally bound to pay taxes. If you do not pay taxes, you are fined and could be imprisoned.
Who Is IRS
The Internal Revenue Service (IRS) is the government agency that handles taxes and creates tax laws. Many feel that the IRS is out to get us and will stop at nothing to make sure we pay our taxes. While it is true that the IRS wants their money, it is not true that they are heartless people just waiting for us to make a mistake. Believe it or not, they are there to help us and as long as we are making efforts to pay our taxes, they work with us.
When Should I Use Tax Software?
Now that I have given you all this information about your options to compare tax software, I want to take a few moments to explain when you should use tax software.
Cheaper than CPA
Using tax software is substantially cheaper than having your taxes prepared by a professional. A CPA is going to charge you hundreds of dollars to file your taxes. If your taxes are complicated, they will charge you thousands of dollars. Using tax software costs you much less than that, even with the most complicated scenarios.
Time-Saving
Tax software is fast and it has become more efficient and effective over the years. Simply being able to import all of your information from the previous tax return is a huge time saver.
Should I Consider Using A Tax Professional?
All of that being said, tax software is not for everyone. When you compare tax software, you should consider your situation. Even if you are not sure of all of the forms you need to file, you probably have a pretty good idea of how complicated your taxes might be. You should keep in mind that you are legally required to file taxes and while the government provides ways for you to apply deductions and reduce your tax liability, they are not fans of you hiding money, or not reporting it.
You must make sure you stay within the law when filing your taxes. If you are not sure how to get those deductions, or you do not feel confident that you can do it properly, then you might want to have a professional do them for you. If you are concerned that you have a situation that might be audited, it is probably in your best interest to have a professional handle your taxes for you. Perhaps, you just do not have the time to focus on your taxes and you do not mind spending all that money to allow someone else to file them for you.
Conclusion
When you want to compare tax software, you should do it early enough so that you can make a good decision about the right one for you. As I mentioned above, the reason why tax season is so scary is because most of us wait until the last minute. We know it is coming, but yet, we never seem to be prepared.
When you are prepared to file your taxes, it makes it a much simpler process. Get started today and compare tax software to determine if you should use one, or let a professional handle them for you.