Buyers Guide: Tax Software Tips
Buying Advice: A guide to purchasing income tax preparation software
While tax software can be easy to use, that's not always the case when choosing between different tax software brands that are available today.
There are popular old veterans as well as newcomers popping up in the tax software market every year.
Use our buyers guide tips to help you sift through the many options available for tax software choices.
Keep in mind that a bargain is NOT a bargain if it puts you through the ringer and adding stress to your tax filing tasks.
Top Tips for Purchasing Tax Software
Choosing Online Tax Preparation or Desktop Tax Software
Both online and desktop tax software options have advantages and possible disadvantages, which are discussed below so that you can make an educated decision on which will work best for you.
Online Tax Preparation
Online tax preparation is the leading format used by the dominant number of American taxpayers. The simplicity of accessing tax preparation software online through a secure connection has its high level of appeal to more consumers than other formats.
Another factor that boasts well for online tax preparation is the fact that you don't need to encumber your computer with another program that may conflict with other software already installed. As we all know, computers can become temperamental as we install more software on them.
Now, while the threat is low, there is the possibility of someone hacking into your system and collecting information. Truth be told, this threat exists whether your using online tax software or not, so long as your on the internet.
Computer Based Desktop Tax Software
There's a good selection available of dependable desktop tax software programs that you download and install on your computer. These programs can also be purchase in a box containing the cd version.
As noted above, there is always the possibility that installing another program on your computer could case your system to function improperly.
With that said, there are several benefits to using the desktop tax software. For one, you don't need to be on the internet to work on your tax return. This allows you to travel around and work on your taxes whenever you want.
Another factor is that some brands allow more than one tax return to be prepared with the one tax software purchase. This can certainly cut the costs for families and friends.
Remember to always keep a printed copy of your income tax return in a safe place, regardless of whether you used online tax preparation or the desktop tax software version. Best to have a backup.
Basic, Deluxe, Premium: What Tax Software Edition Will You Need For Your Tax Filing Needs?
It can be somewhat confusing to determine which edition of tax software will work for your tax preparation needs. Keep in mind that one company's basic or deluxe edition does not necessarily have the same features as another company's program. You can read more about each tax software edition here.
Do I Need to Prepare a State Tax Return?
Some tax software packages include state tax return preparation but most do not. Most tax software brands charge separately for a state tax return.
If you needed to file a federal tax return, you most likely will have to file a state tax return as well unless you live in a state that does not collect income taxes. If you're like most taxpayers, you will be filing one state return.
Organize Your Tax Deduction Documentation
Regardless of whether you take the standard deduction or itemize deductions, a tax deduction finder feature in your tax software choice can help you save some cash by finding every deduction you can qualify for. From there you can decide which format to use.
Make Sure Your Tax Software Has a Guarantee
Your tax software brand should stand behind the accuracy of its products. Most tax software brands offer a "biggest refund" guarantee. This is a no-brainer, if they don't guarantee, it probably aint that good! Stay away!
If You Can't File On Time, File A Tax Return Extension
By Filing A Tax Return Extension with the IRS, you can receive up to 6 more months to prepare and file your tax return for free.
Nobody likes waking up on the wrong side of Uncle Sam. But if you find yourself beyond the tax filing deadline, and you have not filed your tax return, you most likely will feel the wrath of Uncle Sam breathing down the back of your neck.
How To File A Tax Return Extension Online
It's a snap! Filing a tax extension online take merely a few minutes and the chances of it being accepted is nearly 100%.
100% percent you say? Yes! Fact is, Uncle Sam could care less why you are filing for a tax return extension, and he wont ask either. No reason is necessary...
Not paying your taxes owed on time will result in penalty and interest charges that simply wont be friendly to your savings account.
Late Payment Tax Penalties and Interest
The Late Payment Penalty for unpaid taxes after the due date
will generally run at ½ of 1%, This is calculated on the amount of any tax (other than estimated tax) that is not paid by the April 15 tax filing deadline (or whatever date it is extended to due to April 15 falling on a weekend).
This amount is charged for each month or partial month that your taxes remain unpaid. With a maximum penalty of 25%.
A late payment penalty can be avoided if you can show a reasonable reason for not paying the taxes you still owed on time.
Submitting A Late Payment Explanation To The IRS May Alleviate Interest Charges
Reasonable cause requires that you made the effort to pay at least 90% of your actual tax liability before the regular due date of your tax return through paycheck withholding, estimated tax payments, or payments made with Form 4868.
Regardless of any reason behind your ability to pay taxes owed and complete your tax return, stress no doubt will follow you until these issues are resolved.
Make the effort every year to calculate your income tax liability several times a year to ensure you are staying on top of tax bill savings. This can help you make better financial decisions that will allow you to keep enough money set aside to pay whatever tax bill may arise.