It is tax season again. Every year about this time, millions of Americans begin completing their federal income tax return. There are various ways that you can complete your income tax return. One way is to fill out the required paperwork by hand. All of the forms can be downloaded from the IRS’s Web site. Or you can have paid professionals complete your tax paperwork for you. One more option is to use income tax preparation software. Tax preparation software walks you through each step of completing your income tax return. Here, I will focus on the later option–tax preparation software. Today, I’ll use the popular question and answer format get us started. For sake of readability, I’ll break up the questions and answers into two separate blogs. Tomorrow, I’ll give some brief reviews of tax preparation software for purchase.
Why should I use tax preparation software?
Tax preparation software was developed for those who don’t want to have their income tax returns prepared by tax professionals, but also don’t want to complete their returns by hand. Tax preparation professionals can charge upwards of $300 to prepare your tax return. Plus, you need to have all of your paperwork handy regardless if you complete your return by hand or have someone else complete it.
If you choose to complete your federal income tax return yourself, tax preparation software is useful because all of the necessary tax forms come with the program. You won’t have to go to the IRS Web site and locate, download, and print all of the forms you’ll need.
Tax preparation software is also useful because you are guided through an interview that asks you for all of the pertinent information needed to complete your return. You are told exactly where to look on your W-2 or 1099-INT, for example, and the numbers you give are automatically put on the correct worksheet or tax form.
What are the various tax preparation packages I can buy?
There are really only three groups of tax software on the market for purchase. They are TaxAct by 2nd Story Software, TaxCut by H&R Block, and TurboTax by Intuit. Each company offers various editions of their respective tax preparation software. Intuit, for example, offers TurboTax in three packages: Basic, Deluxe, and Premier. Each one includes more features, as well as increases the purchase price. The basic edition provides an easy to follow, complete package for normal federal income tax returns. If your you live in a state with a state income tax, you’ll probably want to buy the Deluxe edition, since it includes software for completing your state income tax return too. If you own a business, then you’ll probably have to buy the Premier edition.
Is there such a thing as free tax preparation software?
Yes, but mostly for those with simple federal income tax returns. TaxAct can be downloaded for free if you are using the 1040EZ return. Also, if your adjusted gross income is less than $50,000 and you meet a few other qualifications, you can try using one of the many Web-based tax preparation services that the Federal government has helped to introduce.
FAQs continued
Tomorrow, check out the second part of our answer and question session about tax preparation software.