- Online tax software can help you properly file and pay taxes without enlisting the help of a CPA/
- Tax software simplifies a once-burdensome process, helping small businesses of any size or configuration ensure they're following the law.
- While researching online tax software, evaluate the pricing, ease of use, the customer support offered, as well as filing options, disbursement options, and if your tax preparer can access the software, so you get the most out of the platform.
- This article is for small business owners looking for an easy-to-understand way to prepare and file their taxes.
With the deadline to file state and federal taxes approaching, many want to file their businesses' taxes early. That's a great goal for the start of a new year, but filing safely and accurately is even more important than beating the mid-April rush. One way to do that is to use tax preparation software.
Because everyone's tax burdens are unique to their situation, there are various small business tax software solutions to handle different company needs. With good online tax software, you can file your small business taxes without any assistance from a tax professional, saving you time and money.
That's not to say all business tax software solutions are the right choice for your situation, nor does it mean you should never hire an accountant or CPA if your taxes are complex. Remember, errors and omissions can result in hefty fees and legal issues with the Internal Revenue Service (IRS).
For business owners trying to get a jump on the tax filing season or at risk of just barely making it before the deadline, we've reviewed today's leading companies in the online tax software space and created this handy buying guide to walk you through the selection process. With the right attention to your specific needs and the options out there, you can safely and easily file your state and federal taxes.
If you already know what you need and just want to see our recommendations for the best online tax software, visit our best picks page.
Why do you need tax software?
Tax software helps to simplify this process by streamlining it and taking you through the ins and outs, step-by-step, in a user-friendly way.
Calculating, filing, and paying taxes can be daunting. With all the intricacies involved in properly calculating the taxes owed – plus the many changes that can occur in tax laws from year to year – many business owners are understandably worried about mishandling such an important yet sensitive process.
Key takeaway: Tax software simplifies the complicated and ever-changing process of filing taxes by taking you through each step clearly and carefully.
Tax software vs. accounting software: What's the difference?
Tax software and accounting software have two different end uses.
Tax software is focused on calculating, tracking and preparing taxes. This software automates the process and takes you through how to calculate your taxes, including any possible deductions that might lessen your tax burden. Many tax software platforms also allow you to file and pay your taxes directly from the platform. However, you may not be able to use the same version of tax software from year to year, as tax laws change.
Accounting software is more focused on the financial health of your business as a whole. This software is designed to track every dollar coming in and going out of your company, including expenses and payroll. These systems also track invoices and purchase orders. While taxes are an expense, accounting software does not tabulate taxes owed in the same way as a platform dedicated to the multifaceted tax calculation process.
Key takeaway: Tax software is focused on preparing federal, state, and local taxes; accounting software is best suited for tracking monies that flow in and out of your company.
When is the best time to buy tax software?
The best time to buy tax software is well before it is time to file your taxes, whether that be in April or the fall when certain corporate and business tax filings are due. The key is not trying to buy it too early. You want to make sure the tax software you buy supports the tax year you are filing for. If you shop too early, you may end up buying the previous year's tax software, which may not reflect the most recent changes in tax law.
However, don't cut it too close to when you need to file your taxes. You want to have time to learn how to use the program and gather the appropriate documentation to make your deductions and claims. You'll also give yourself some breathing room and won't feel as rushed to meet the IRS' filing deadlines.
Key takeaway: Plan ahead. If you're considering buying tax software, do your homework well before it's time to file taxes so you have ample time to prepare. Be sure you're purchasing software for the current tax year, as some programs may release new editions annually to reflect the most up-to-date tax code.
Top Online Tax Software Features to Consider
When you look at online tax software options, you should keep some details in mind. If you know which forms you need to file, make sure the program you choose supports them. If you need to file state taxes, you should also see if that filing is included in the initial cost or if it will require an additional fee. If you're looking for the biggest federal tax return, software that can accurately find and apply various deductions and credits is a major timesaver.
Perhaps the most important factor of all is the accuracy of the tax software. No matter how quickly it gets the job done or how easy it is to use, any money you initially saved will be moot if you get audited by the IRS and owe the government money because of errors or omissions.
Selecting tax software is more than looking at screenshots of an interface and going for the cheapest option. Function and accuracy are king.
Most online tax software vendors have several plans with tiered pricing, so the cost depends on your needs. Every software option has its own feature mix and pricing structure, so you should identify which features you need so that you can accurately compare products. The less expensive options might meet your needs, but if you need advanced features, the software will usually cost more.
There are many cheap tax software solutions on the market, but some cut corners or lack essential features. Others are highly effective at filing your taxes. It all depends on your specific needs, but avoid choosing software solely based on price when browsing companies.
Ease of Use
Most online tax systems are simple to learn and easy to use once you get acquainted with the user interface, but it never hurts to try them out before you spend any money. You don't want to find out the software you purchased is a nightmare to navigate and makes the process of completing your tax forms even more confusing.
Many tax software companies offer free demos of their software. If a company doesn't advertise one on its website, ask for one. If the provider refuses, consider that a red flag. Most reputable companies will let you test-drive their software.
One of the most important features of any tax software application is the type of forms it can file. Make sure it supports the forms you need. Most leading software programs support a huge variety of forms, so odds are good you'll be able to find what you need if you select the right pricing tier.
You also need to consider state taxes, not just federal. Does the software offer all the state forms you require? Does it charge an additional fee for state returns? If so, how much?
Another consideration is how you'll get your money if you're owed a federal return. Some software makes this process easy with options for direct deposit and PayPal. Even a traditional check by mail is usually available if that's your preference. Other programs support only specific delivery methods, such as gift cards and prefilled debit cards. Make sure the software you're considering supports the disbursement method that is most convenient for you.
Deductions and Credits
Any tax software worth its salt maintains a database of hundreds of tax deductions and credits. Unless you know for sure how the company has built deductions into its system, it's hard to tell if your software will overlook opportunities for you to reduce your tax burden. Speak at length with company representatives about how the software handles deductions and credits, and ask how you can be assured of its accuracy. Most online tax software programs run an accuracy check to ensure precision – press the company reps for details on this function.
Many tax programs are web-based or have mobile apps, so you can pretty much do your taxes anywhere. Some programs, however, are not fully compatible with various platforms. Does the software work on Mac for home or office filing, or just on PC? What about a mobile app for filing or checking your financial status – will it work on both Android and iOS phones? Flexibility and compatibility are the names of the game here, so make certain you can run the software on your preferred platforms before you purchase anything.
Even with the most comprehensive tax software, accidents do happen. When errors occur, it's good to have a professional tax preparer in your corner. Some of the leading companies offer their tax preparers' services, which are either included in the total purchase or available as an add-on. If you think you'll need help along the way, keep this option in mind when comparing tax software.
Tech Support and Customer Service
The quality and availability of both technical support and customer service are important. If something goes wrong, you want reliable, helpful and forthcoming staff members responding to your requests. Acquaint yourself with the company you're considering before making a final decision; good tech support can turn a crisis into a minor inconvenience, so don't compromise on value here.
Key takeaway: When researching online tax software, pay special attention to the filing options, ease of use and customer support. While price is important, don't make it your main priority.
Choosing your Online Tax Software Application
If you do your research, you can be confident that the tax software provider you choose will make the headache of tax season a little bit easier to handle. At best, you might even collect some money you didn't realize you were entitled to.
Additional reporting by Stella Morrison and Adam C. Uzialko.
Ready to choose your online tax software application? Here's a breakdown of the rest of our coverage: