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5 Issues You Need To Know Before Choosing Tax Preparation Software
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In 2009, over 95 million individuals opted to electronically file their federal income taxes to the IRS. In fact, over two thirds of all returns the IRS processed last year were received through various e-file providers.
The advantages to filing electronically verse snail-mailing a paper return are clear. Accuracy is improved, quick confirmation is received, and there is no paper return to mail off. The biggest advantage is the expedited processing time. An electronically filed return with the direct deposit option can produce a refund in your bank account in as little as 7 to 10 days.
There are decisions to make though before purchasing your current year tax preparation software. Here are 5 tips to keep in mind.
1. Do you know what level of software you need to purchase?
Most software companies will make various versions of their product available to you. Each different software tier carries additional options, along with an increased price. In order to choose the most appropriate software package, you will need to know the complexity of your tax return.
If you only have a simple return to file that does not need to support various schedules or allow for advanced deductions, then you can likely go with a basic package.
However, if, for example, you plan to itemize your deductions on a Schedule-A, claim self-employment income and expenses on a Schedule-C, report profits or losses from investment income on a Schedule-D, or account for rental income on a Schedule-E, then check to make sure the software you are purchasing allows for these line items.
2. What types of tax resources accompany the software?
The nice thing about some tax preparation software is that you do not have to be a genius and decipher what goes where on your tax return. Tax software is generally set up in such a way where the software decides what you can and cannot claim, what needs to be reported and where it goes on the 1040 form.
However, if your return is more complex, you may opt to purchase software that has explanations based on tax law changes, links to IRS publications, tech support, audit guarantees or references cited that support the decisions that the software is making for you. Remember, you alone are responsible for the accuracy of your tax return, no matter what program you choose to use.
3. Is electronic filing included in your software package?
Some tax preparation software packages are set up to securely connect with the IRS and transmit your information electronically. Other software will only assist you in the return preparation and then it is up to you to mail out the return to the IRS.
4. Is state return preparation and or state e-filing included?
If you are required to file a federal tax return, then you likely need to file a return to your state as well. Some software includes the option to do a state return. Both the federal return and state returns are different; just because you are familiar with one does not mean that the same tax rules apply to the other. Purchasing the software that has both is generally wise.
5. Have you checked for free software through the IRS web site?
If you have multiple returns to do, or a complex tax return, then purchasing desktop tax preparation software may be the way to go. However, if you qualify, you may be able to get your federal, and in some cases, your state tax return prepared and filed for free through various companies that the IRS partners with each year for free e-filing.
Go to IRS.gov and click on the FreeFile logo. You will be directed to a page where you can choose a free file company or you can ask the IRS to help you choose one. Even if you do not qualify for free e-filing, you can always securely file any return through irs.gov.
Jen Silva is a writer and specialist of small business software and solutions on topics such as Tax Preparation Software. Please visit http://www.tax-compare.com/ for more info on Tax Software.
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