Keeping great financial records and knowing the tax code well enough to ensure that you always know the deductions or exemptions you may qualify for is a lofty goal. Pretty much only those who make their living studying the tax code actually understand it, and it is a big hassle to have to try to keep track of who knows how many documents need to be used come tax time. Not to mention, the penalty for failing to properly file your taxes in an accurate and timely manner can result in fine, or, even worse, an audit.
Most of us don’t have the means to hire a personal accountant to manage the minute details of our financial lives, but this does not mean we are doomed to filling out our taxes by hand and crossing our fingers that we have done everything correctly. Not only does this take a lot more time than it needs to, it likely results in you paying more in taxes than you really need to, as you didn’t know all the different write-offs, exemptions, or tax credits that you may qualify for. All of these things add up by reducing your taxable income and, thus, reducing your overall tax burden.
This is why so many people swear by at-home tax preparation software suites as a great happy medium between doing taxes yourself, by hand, and paying out the nose for someone to do it for you. As time has passed, these programs have gotten more intuitive. They have gotten more sophisticated, comprehensive, and user-friendly. What this means is that these programs are accessible to a wider range of people than ever before, making it as simple as a few clicks of a mouse or a few presses on a touchscreen to fill out your taxes and ensure that you are taking advantage of all tax breaks and credits you might be entitled to.
In this guide, we will touch on some of the things you will want to keep in mind and consider when looking into potential tax preparation software tools. We then move on to discuss the wide ranging and varied benefits of utilizing comprehensive tax preparation services. Finally, we briefly review one such suite of software tools called TaxAct, providing an informative and unbiased review of one of the more popular tax tools.
Things to consider when choosing tax preparation software
There are a few things that you will want to consider before you even begin shopping and looking into potential options for tax preparation software. Like most things today, there is actually a huge range of different types of tax preparation software tools that are more or less comprehensive or sophisticated, that offer more or fewer added features, and so on. Because of this variability, the price range for this software can be pretty wide. For all intents and purposes, tax preparation software ranges from less than $20, to more than $100, depending on what you choose.
Due to the variability in price, it is really helpful to have a budget set before you ever begin to look at potential options. Having a preset budget is a great way to stay on track and it will also help to streamline your research process. All you do is waste time if you research a lot of products only to find out later on that they are out of your price range. When you have a budget already in place, you can easily eliminate any option that falls outside of it.
Next, you will want to consider how simple or complicated your tax return is. This will help determine how many different features and what kind of functionality will work best for your needs. If you are a single income, single tax filer, most basic tax preparation software will work just fine for your needs. There is no need to spend extra money on more comprehensive suites of tools that are designed for people with complicated finances. If you are a sole proprietor, you have a wide range of assets, you own a large business, or you have tons of different kinds of write offs, chances are, you are going to want a more comprehensive set of tools.
It is also important that you really understand what comes with the software tools you purchase. Most people expect to buy a tax preparation software suite and be able to file both state and federal taxes with ease. While this is what these tools were made for, it should be noted that these tasks are not always free. With a lot of software, particularly more comprehensive tools, you can easily file both your state and federal taxes online for free. Many other software programs will let you file your federal taxes for free, but may charge a fee to file your state taxes. Less commonly, but not unheard of, are software tools that don’t offer free filing for either state or federal taxes, but will file them online for you for an additional charge.
Though avoiding an audit is often one of the main reasons cited that people are so concerned about accurate tax preparation, it is not entirely unavoidable. Some people will just be unlucky and find themselves under audit. Some software programs will offer human audit support as part of their included services. This doesn’t mean they provide you with legal representation, but it does often mean that you can get in touch with an expert on tax law and audits, who will tell you what you will need to do and what you should expect. Some companies offer actual representation in the event of an audit, but this is only available for an additional fee.
Benefits of using tax preparation software
There are many benefits of using tax preparation software, especially when compared to doing it yourself or paying a professional to do it for you. First, it is cheaper than the latter and safer than the former. When you fill out your taxes yourself by hand, you may accidentally forget to fill in all the appropriate fields, or you may fill them out incorrectly. Though you may check and even double check, you might not notice it until you find yourself getting a penalty or an audit.
With tax preparation software, there are prompts and flags that ensure that you fill in all required fields and you will not be able to submit your return if one of the required fields has been left blank. The software may also come with additional features, such as a deductible finder that will help to ensure that you have taken all deductibles that you may be entitled to claim.
It is a lot faster to file your taxes using tax preparation software than it is to file them by hand. Firstly, you don’t need to make your way to the post office after all is said and done; you will be filing online, so submitting it is simply a matter of hitting the submit button. A lot of these software suites are able to import some of your basic data, filling it in for you and saving data entry time. Though it will depend on the type of software you are using and the complexity of your return, many people are able to file their taxes in about a half hour.
TaxAct tax preparation software suite
TaxAct is one of the more popular basic tax preparation software suites available on the market. There are many pros and cons associated with this suite of tools and whether it will work for you or may be better suited to those with simpler financial filings, will depend on your personal details. One of the things that makes this software program so popular is that it is incredibly affordable, but it still offers a range of help features that make it a valuable program, even to people who have little to no understanding of the tax code.
One of the areas where it lacks when compared to other software suites is in the complexity of its visual interface. It is a pretty bare bones program, but it still uses a simple, prompt-based data entry technique like that which is used with more sophisticated tools. It offers a fairly wide-reaching FAQ section that provides a good, broad range of general information. Users of TaxAct also receive free email and phone support for questions that cannot be answered by FAQs or forums. This is a great benefit for those moments where you are really stuck on a section or aren’t sure if or how something may apply to your situation.
It should also be noted that this support is unlimited, so even if you have a ton of questions, you are free to ask them. This is a great suite of tools for basic income tax returns for married couples or single individuals who do not have a wide range of assets; own varied business or rental properties; are a sole proprietorship; and so on. The only tax forms that can be filed using this software are the 1040A or the 1040EZ. All other forms will need to be filed separately, and other levels of functionality may prove more valuable than this for more sophisticated or complicated finances.
For those with simple taxes, it is likely that you will be able to file your federal and state taxes for free. If you have more complex finances and itemize a lot of things, you can still use TaxAct services at an additional fee depending on what you need. There is a Plus level with provides federal returns for $30 and state returns for $35. This is great for people who own rental properties or give significantly to charity.
Finally, there is a premium package for those who are self-employed or sole proprietors, or for those who have a wide range of different assets and holdings. This is the most comprehensive version of the software that has all the features of the previously described versions with a few added bells and whistles. It allows you to file even a complex federal tax return for $45 and a state return for $35.
Taxes are daunting to most people and if you have ever seen the weighty tome that is our nation’s tax code, you know just how much there is to really know if you want to be an expert. What’s worse is that the tax code is regularly changing, which often means that once you have down the new intricacies and details, they will have changed again. Most of us don’t have the time or the desire to become tax code experts so as to ensure that we know all the various details, including what kinds of exemptions, write offs, or other tax credits one might qualify for.
Since most of us don’t have the money to hire a personal accountant, there is a happy medium that blends convenience and affordability. Tax preparation software is an affordable way to accurately fill out your taxes without spending a ton of time manually filling forms out by hand. With most tax preparation software, you get an easy-to-use interface that prompts you each step of the way as to what part to fill in next and where to find the required information. Some of these software suites are able to import your personal data directly into the form, meaning that you don’t have to fill any of your basic information in yourself.
Many software suites also have flags or will not allow you to submit your return if a required field is not filled in properly. This helps reduce errors, lag time, and potential frustration. Many of these software suites allow you to quickly your state and federal tax returns, often for free. This helps save you time, money, and hassle. Software tools like TaxAct are great ways to take control of your taxes and have the peace of mind that your taxes are filed properly, accurately, and without spending a ton of time in the process.