It's Tax time - Some Answers on Tax Software

Taxing Questions on Tax Software

So its tax season again – yippee! As you look through your box of paystubs, bills, receipts and donations you may be wondering: How do I make this easier? You have quite a few options available.

The first, and most expensive, is to get someone else to do your taxes for you. There are many tax services, offices and CPAs around that can prepare your taxes. Fees average around $200 for these services, with prices starting at around $125. But for many of us today’s tax software can make doing (if not paying) taxes pretty painless.

Your second option is to do them yourself. You can either get the forms from the IRS website or your local library and fill them out or buy tax preparation software that will help you through the process.

If you decide to go down the software route, there are many different packages available. The big three: TaxAct, TaxCut, and TurboTax all offer the ability to do your taxes online or on your machine (a complete list of vendors can be found at the IRS website here). Software for your computer can be purchased from a variety of online stores or at most brick and mortar stores that sell office supplies.

All but the most basic packages will walk you through the tax process in a very straightforward and methodical manner. They start out with your name, your address, and social security number. Then questions proceed about your children to determine if they can be counted as exemptions, after that, series of questions will determine all your sources of income and all your eligible deductions. If you are already a whiz at taxes you can always elect to skip the question and answer format and just fill in the blanks yourself.

Whichever package you choose, eventually, you will get to the end of the process and be able to file your taxes either electronically or via postal mail.  So here are a few hints:

1. Don’t be fooled with all the talk about “free” tax software and preparation.  Most software will let you prepare your taxes, but you have to pay to be able to print or file electronically. (TaxAct is one of the exceptions to this rule; they do allow you to file your Federal return for free).
2. Don’t overbuy in the software department. Illinois taxes are really pretty simple to do, and the Illinois Department of Revenue has a pretty straightforward website for entering your tax information. I would have a look at it before paying for the “state” version of any tax software.
3. If you have a 401k or some other investments, check with your investment provider. You may be able to get your tax software at a nice discount. (I got mine for 35 percent off the online version).
4. If you have a lot of donations for clothes, toys, books, or other physical items, take a look at TurboTax’s website. It can make a big difference valuing your donations. One word of caution here: if you do use their site, you are pretty much stuck with their tax software as well. There is no way to print out the values of your items after you enter them. You can import them into TurboTax with one click, however. (Yes I know Taxcut has a site as well, but after 30 minutes of putting deductions into the site my wife noticed it had not saved anything!)
5. I am sure you are wondering, is it safe to do my taxes online? My only answer to that is it is as safe as the vendors can make it. Each of the companies spends a lot of time and money making sure that your information is safe. One breach would put any of them out of business for good.  VeriSign has a good article on online tax safety here. You will need Adobe reader to open the above link.
6. Is eFile safe? Do you buy things online? Do you do your banking online? If you trust these services, then you will probably feel safe trusting eFile. If you don’t, postal mail is always a stamp or two away.
7. What is the benefit for eFile? To me the biggest benefit is getting my refund faster. With eFile you get your return in 7-10 days, the money goes right into your bank account and you do not have to worry about someone stealing your tax refund check.

In conclusion, let me say this: over the years I have used TaxAct, TurboTax and TaxCut, I found them all to work equally well. My taxes were done quickly and my return was filed painlessly. I had my return in about 7-10 days.

There are other products out there which can, most likely, do just as good a job as the ones I have mentioned. I do not endorse one product over the other. What is best for your tax situation is unique to you and I am not a CPA nor do I really like accounting all that much. When in doubt you can always phone a friend, a CPA or worst case the IRS.

Good luck this tax season, and I hope you get a nice return. Barring that, may your payment be small.