While having choice can only be a good thing, when it comes to tax software there can actually be too much choice, making it hard to actually know if you’re even using the solution best for you. Because these kinds of programs cater to a variety of clients and each provide different features and extras, it’s quite easy to end up with a solution that won’t satisfy your particular taxpaying needs. However, all it takes to find the right choice is to think about your needs and the right software will present itself in no time.
Local Software or Online Solution?
Admittedly, local tax programs and their online counterparts share a fair number of features, but there are plenty of key differences as well. For instance, desktop tax solutions are more secure and can manage multiple tax returns for free – sometimes even including one or two state tax returns – but usually the software is expensive and quite often have the exact same features as online equivalents. With online software, however, there is everything typically related to the convenience of cloud technology, such as seamless data importing from previous years’ returns, competitors’ documents, or even electronic W-2s. These programs are typically cheaper than their desktop counterparts, too, and often the most basic versions is free to use.
Federal and State Returns
Another important aspect when selecting the right tax software is whether the program is able to prepare state tax returns as well. The good news is that almost all solutions that we have tested so far are capable of managing state taxes; in fact, many tax programs can even copy data from the federal return to the corresponding sections of the state return. The only thing to consider is that state taxes are never provided free of charge in online solutions, meaning that you may end up paying after all – even if a free tax solution is chosen.
Tax programs are known for being quite thorough with their interviews, which is a must to ensure that all relevant tax topics are covered and that users receive the biggest refund in the end. However, there are actually two different approaches when it comes to this thoroughness. The first approach is applied by programs like TurboTax that tend to cover the smallest of details multiple times during the interview, making it ideal for those who aren’t that familiar with the tax process. The other approach caters towards more tax-savvy users by allowing them to skip certain topics, which doesn’t provide the same thoroughness but can significantly reduce the time spent on preparing tax returns.
Most tax companies have designed their programs to allow upgrades to a higher-tier product covering particular tax forms as well as to purchase additional features like the option to deduct fees from the refund amount or to receive assistance against identity theft or with IRS audits. But in order to avoid any frustration arising from selecting the wrong solution and being unable to downgrade without having to start the return from scratch, it’s better to initially choose a product that covers all relevant tax situations:
- For taxpayers who want to create simple tax returns (1040EZ), don’t want or need to itemize their deductions, or just have no idea which product is the best should opt for the free, basic version.
- Individuals or families who need to maximize their deductions by itemizing them should go with the cheapest paid program. This version often comes with advanced customer support via live chat, which is essential for those who need help resolving tax-related issues as quickly as possible.
- Taxpayers with income from interest and rental property owners usually have to upgrade to the second or third most expensive product to have access to the required tax return forms.
- As for Schedule C filers – sole-proprietors and SMB owners who need to report business income and expenses related to their work – the top-tier product is the one that needs to be chosen. However, this level of software always covers all possible tax situations and often include pay-only features or extras like real-time assistance by certified tax experts.
- Why Should I Use Tax Software?
- Which Tax Software Should I Use?
- Should I Update My Tax Software?
- Is Tax Software Deductible?
- How Does Tax Software Work?
Best Tax Software of 2020