It’s tax season again, and getting ahead on filing your business taxes is a great goal. Even more important than finishing your taxes quickly, though, is making sure you file them accurately and securely. Online tax software can help you be successful on both fronts.
Because everyone’s tax burdens are unique, there are various small business tax software solutions to handle different company needs. We reviewed today’s leading programs in the online tax software space and created this buying guide to walk you through the selection process. With attention to your specific needs and the multitude of software options out there, you can safely and efficiently file your state and federal taxes online.
The prospect of choosing online tax software may seem overwhelming at first, but the process isn’t all that different from buying other business equipment and programs. The following steps can help you find the best tax software — and other products — for your business.
Selecting the right tax software requires more than looking at screenshots of an interface and going for the cheapest option. Function, ease of use and accuracy are key. Consider these aspects when deciding which online tax software is best for your business.
Most online tax software vendors offer several plans with tiered pricing, so the cost you’ll pay depends on your exact needs. Every product has its own feature mix and pricing structure. The less expensive options might meet your needs, but if you require advanced features or help with state tax returns, the software will usually cost more.
Some less expensive or lower-tier tax software solutions cut corners or lack essential features. However, relatively inexpensive programs that are highly effective at filing taxes do exist. Tax preparation is important, and so is the amount of time you put into it, so it’s important to avoid choosing software solely based on price.
Most online tax programs are easy to use once you get acquainted with the user interface, but it never hurts to try before you buy. You don’t want to find out that the software you purchased is a nightmare to navigate or makes doing taxes even more confusing.
Many tax software companies offer free demos of their software. If a company doesn’t advertise one on its website, contact them and ask for one. Scan professional reviews and user reviews for insight as well, since these often note how easy or challenging the program is to use based on real experience.
One of the most important features of any tax software application is the types of forms it can file. Make sure your chosen solution supports the forms you need. Most leading programs support a huge variety of tax forms, so the 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. Does the software offer all the state forms you require? Does it charge an additional fee for state returns? If so, how much? The answers to these questions should factor into your purchase decision.
Another consideration is how you’ll get your money if you have an overpayment of estimated or withheld taxes. Most software makes this process easy by including options for direct deposit and PayPal. Even getting a traditional check by mail is usually possible if that’s your preference. Beware of programs that support only specific delivery methods, such as gift cards and prefilled debit cards.
All tax software companies build hundreds of tax deductions and credits into their system. You should be able to take any applicable deduction or credit with any tax software you use. However, one tax program may be more likely than another to help you find all potential deductions and credits. You should also see whether it’s easy to enter your information and find out if you qualify for specific tax benefits.
If your tax situation is complex, or if you have an unusual tax event this year, read the reviews of the tax software you’re considering, paying particular attention to whether it helped people find tax benefits. [Check out which tax deductions you can and can’t take.]
Many tax programs are web-based or have mobile apps, which means you can do your taxes anywhere with an internet connection. Some programs, however, are not fully compatible with various platforms. Does the software work on Mac devices or only PCs? What about a mobile app for filing or checking your financial status — does the application work on both Android and iOS phones? Flexibility and compatibility are essential, so make sure you can run the software on your preferred platforms before committing to a purchase.
Even with the most comprehensive tax software, sometimes you need extra help. It’s beneficial to have an easily accessible tax professional in your corner if you need one. Some leading companies offer professional tax advice, either as part of your package or as an add-on. Weigh the importance of this expertise as you research different vendors.
The quality and availability of both technical support and customer service are critical. If something goes wrong with the program as you’re filing your taxes, you’ll want reliable, helpful and forthcoming vendor representatives responding to your queries in a timely manner. Acquaint yourself with the company behind the software before making a final decision; good tech support can turn a major crisis into a minor inconvenience. Don’t compromise on value here.
When researching online tax software, pay special attention to each program’s filing options, ease of use and customer support. While price is important, it shouldn’t be your deciding factor.
The best time to buy tax software is well before it’s time to file your taxes, whether that’s in February or in the fall, when certain corporate and business tax filings are due. You never want to buy online tax software too close to when you need to file your taxes. Give yourself time to learn how to use the program and gather your documentation.
When you make the purchase, ensure the tax software is for the correct tax filing year. Don’t worry about IRS changes being final before you buy your tax software. The IRS often makes changes well into the tax filing season. Once you buy tax software, the program will prompt you to update it online whenever necessary. The price of your tax software includes any updates needed for that tax year.
Calculating, filing and paying business taxes can be daunting. With all the intricacies in properly calculating the taxes owed — plus keeping on top of yearly changes in tax laws — many business owners are hesitant to prepare their own tax returns. Tax software simplifies tax preparation by streamlining the process and doing the hard work for you. It asks you a series of user-friendly questions, performs the calculations and prepares the correct forms for printing or electronic filing. Tax software is not only easier to use than preparing taxes by hand, but is also far more accurate.
If you have a small business, you may be able to file your tax return without the help of a CPA or other tax professional. No one knows your business better than you do, and today’s online tax software takes a lot of the difficult work out of preparing tax returns. As an added benefit, you can learn more about how your enterprise is doing financially and where your money goes if you prepare your business return yourself.
That said, you’ll probably still need tax advice at some point, especially as your business grows. CPAs can offer much guidance in the way of tax and business planning. They can explain to you the advantages of different types of business organizations, for example, or tell you how different depreciation methods will affect your taxes in the long run. Plus, some tax situations are too complex or unusual to be handled with a tax program. And if you make a mistake, errors and omissions can result in hefty fees and legal issues with the IRS, including a tax audit.
You should also take into account the time and effort it’ll take to do your own business taxes. Every hour you spend working on your taxes is an hour you’re not planning and developing your business. It’s important to know when you have the time and capacity to do your own taxes and when to pay a professional. For most growing small businesses, the time eventually comes when hiring a CPA more than pays for itself.
Tax software and accounting software have two different end uses. Unless your business is very simple, you probably need both. [See our top picks for high-quality accounting software.]
Tax software focuses on calculating, tracking and preparing taxes. These programs automate the process and take you through calculating your taxes, including any possible deductions that might lessen your tax burden. Many solutions also allow you to file and pay your taxes directly from the software. It’s important to note you must buy a new version of tax software each tax year.
Accounting software, on the other hand, tracks your business activities for the year. This includes cash and noncash entries such as revenue, expenditures, payroll, depreciation and interest expense. Accounting software uses this information to produce financial statements, including income statements, statements of cash flow and balance sheets, which you can use to analyze the health of your business or to provide to outside parties, such as a potential lender, supplier or investor.
Basic accounting software doesn’t prepare tax returns, but unlike tax software, you don’t need to repurchase wholesale each year. You can sign up for software contracts of different lengths depending on your chosen vendor.
We’ve reviewed some of the best online tax software to make your shopping experience easier. Below are two highly rated options.
If you do your research, you can be confident that the tax software you choose will make tax season for your business easier. Even more importantly, using the right tax software can give you peace of mind, knowing you’ve filed correctly and received the tax benefits to which you are entitled as a business owner. Take advantage of all the tools online tax solutions offer. If you find the right program for your business and use it to its fullest extent, it can be a game changer for your business.
Andrew Martins and Stella Morrison contributed to this article.