10 Tips for Choosing Tax Software

Posted on 1st Mar 2019

Do You Want Online Tax Software or Desktop Tax Software?

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There's a good selection available for dependable tax software that you install on your computer as well as online tax software that is accessed through an Internet browser. Both online and desktop tax software have advantages and possible disadvantages, which are outlined and discussed in Online Tax Software or Desktop Tax Software?.

Tip: Remember to always keep a printed copy of your tax return in a safe place, regardless of whether you use online or desktop tax software.

Basic, Deluxe or Premium: What Tax Software Version Do You Need?

It can be confusing to decide which version of tax software will work for your tax preparation needs because one company's basic or deluxe version does not necessarily have the same features as another company's product. Premium versions share the same base features, but some have additional perks with others don't.

It's a rare find, but some tax software comes in just one version with all the features needed for just about any return. But, if you are considering software that is available in more than one version, read Which Tax Software Version Do I Need? to get help with choosing.

When in doubt, buying the highest version costs more but ensures that you have all the features you will need to prepare your tax return. Or, better yet, use online tax software and start your return with the basic or deluxe version. If your return requires features in a higher version, the online software will let you know, and switching to the higher version after paying the difference is extra easy.

Do You Need to Prepare a State Tax Return?

The price of some tax software includes a state return, while other tax software charges separately for a state return. If you need to pay for a state return, be sure you know what it will cost you.

If you were a resident of more than one state because you moved part-way through the year and both states collect income tax, you will need two separate state tax returns. If your tax software comes with a state return, you will most likely need to pay for an extra state tax return. If your tax software does not include a state return, you will have to pay for two. Of course, you can opt to do state returns manually or check out the Department of Revenue website for the state to see if they provide free online income tax filing.

Need Help Organizing Tax Deductions?

The tax software should include understandable explanations of tax laws or quick links to IRS publications, if it doesn't, look elsewhere immediately. Be sure that the software includes a tax interview, which explains how to complete a return as you go through it. Both of these features make preparing income taxes quicker and less stressful.

If you itemize deductions, a tax deduction finder feature works by asking you questions can dig up deductions you may forget. If you already use tax deduction tracking software and you have made many non-cash donations, you may want to ensure that the tax software will import your tax deduction data.

If you are self-employed, be sure the tax software includes Schedule C and if you are an active investor, a feature for calculating capital gains can save hours.

What About Free Tax Software?

If you have a very simple, basic tax return, you need to investigate free tax software. You'll find many free offerings from most online tax software, and some of it works for even more complex returns. The trade-off for free is that the software will nudge you to upgrade to a paid version, and the frequency of these reminders varies by the software.

Another option is to take a look at the IRS FreeFile program, which is open to all taxpayers who qualify.

Tip: Be on the lookout for added costs for a state return or electronic filing. Read the fine print at the bottom of the web page.

Do You Want to File Electronically?

eFile fees may be included with the cost of tax software, but there is often a separate charge for it. Find out how much the tax software charges for electronic filing if you plan to eFile (the IRS strongly prefers that you do so) instead of printing out and mailing your tax return. State returns usually have a separate eFile fee as well.

How Much Tax Software Help and Support Do You Need?

If you have a question that is specific to using the tax software, you should be able to contact software support by clicking a link in the software, but you may need to wait for an answer. The top tax software brands offer support by chat, which is instantaneous, but you may need to wait several minutes for an answer if the support rep needs to research your question.

If you have an income tax-related question, you may have to rely on an online forum linked in the software to search an answer. These forums are generally moderated by tax professionals and are good for general questions. Some tax software offers direct access to a tax professional via phone, email or chat for a very reasonable fee, or even for free.

Is there a toll-free number, email address, chat and/or an online forum available to get answers to your questions about the tax software? Is there help for both using the tax software and for income tax-related questions? Is there a fee for asking a tax professional for help?

Does the Tax Software Have a Guarantee?

Does the tax software manufacturer stand behind the accuracy of the product? If you are audited, will a tax professional be provided to assist you at no cost, or if there's a fee, what is it and do you have to pay at the time you file your return, or can you pay if you're audited.

While you are very unlikely to be audited, find out if tax audit help includes a professional to work with the IRS on your behalf. Tax software that has the name of a tax service in the title usually offers this service, although other well-known titles do so as well.

Most tax software has a "biggest refund" guarantee. Although the software will often produce slightly different numbers when the same return is entered, the difference is negligible for the top tax software.

Another guarantee to look for if you use online tax software is one that says the price quoted at the time you started your return will not change if you file your return later in the season.

Does Your Computer Meet the Minimum System Requirements?

If you have an older computer, be sure the tax software will run on your system by checking the requirements listed on the box for desktop software. If you use online tax software, this should not be an issue as long as you are using a current web browser. The box, support web page or other documentation for the software should mention whether the tax software runs on a PC or Mac and how much hard drive space and memory is required. Video and Internet-related requirements should be mentioned as well.

Is the Software for The Correct Tax Year?

This advice sounds obvious, but income tax software from years past is still for sale online and at some discount software retail stores. The tax software should note which tax year it is to be used for. In 2012, you will prepare income taxes for the tax year 2011.

10 Tips for Choosing Tax Software

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