How to File Your Taxes Easily with Automated Tax Software
Like it or not, taxes are a part of life. And paying them can get pretty complicated. Fortunately, tax preparation software can make the process a lot easier.
Here’s what you need to know.
First off, do you even need it?
Before we get to the software, let’s start with the big picture. There are three basic ways to prepare your taxes:
• Fill out forms from the IRS manually (aka the old school way)
• Use tax preparation software
• Hire a tax professional
If your taxes are fairly simple, meaning you only have one or two W-2 forms, you take the standard deduction versus itemizing, and you have few/no credits or other adjustments, then preparing manually will probably be pretty straightforward and will give you the clearest understanding of how your taxes work. The downside is it’s a little more labor intensive, especially as your taxes get more complicated.
At the other end of the spectrum, you can hire a tax professional to prepare your taxes. This will be the most expensive option and you probably won’t get much insight into how your taxes are calculated. But you’ll be working with a professional one-on-one who will do the work for you (of course professionals can also make mistakes too).
Tax preparation software is between the two. It’s relatively inexpensive and will walk you through your tax return step-by-step, doing most of the work/calculations for you.
How tax software works
If you do choose the tax software route, there are two basic ways you can get it;
1) Access it online through a provider’s website
2) Install it on your desktop by downloading it or with a disk (yes that still exists)
To get started, you’ll enter your personal information, like name, address, and filing status. If you’ve used the same software in previous years, you should be able to pull the information directly without having to re-enter it manually. (We should mention that tax software is only good for one tax year and you’ll need to buy new software every year).
Next, you’ll need to enter information about your earnings for the year, including your investments. The software will walk you through step-by-step and help you figure out the more complicated aspects, like whether you should take the standard deduction or itemize your deductions, and will check to see if you qualify for any other adjustments that might lower your tax bill. Again, if you’ve used software in the prior year, it should pull your historic data automatically.
Once you’re done, the software will calculate your tax refund (or how much you owe) and you’ll then have a choice between filing your return online or printing it out and mailing in a paper copy to the IRS. Filing online will get you the fastest refund.
Comparing different offers
Several companies offer competing tax preparation software and each offers multiple products depending on how complicated your taxes are.
At the low end, these start with free offerings if you file a simple tax return (W-2 with limited investment income and you take the standard deduction) up to more complicated situations like being self-employed. There should be a clear description on each website for what version you’ll need.
In general, the more advanced the software, the more expensive. But they also compete by offering additional features, like audit protection and the ability to speak with a person. You’ll want to make sure you know what is/isn’t included in a particular version.
For each product, we show the prices currently listed on the respective websites for online versions. But those prices are subject to change, so be sure to check before buying. Also note that for most of these, there’s an additional charge to prepare your state taxes, which we’ve included below.
Quick Take: Generally considered to have the strongest reputation among tax prep software companies, slightly more expensive than competitors but known for ease of use and intuitive/conversational design. Shop the site
• Free Version: You can qualify for their free version if your taxes are simple, described by TurboTax as “A simple tax return is Form 1040 only, without any additional schedules”. This basically means you receive a W-2, have limited investment income, and you’ll be claiming the standard deduction.
• Deluxe ($60 for Federal + $45 for State)
• Premier ($90 for Federal + $45 for State)
• Self-Employed ($120 for Federal + $45 for State)
TurboTax Live: For each version, you can upgrade to TurboTax Live for the ability to video chat with a tax professional, but the prices will increase for each product.
Quick Take: Also a strong reputation in the tax filing world, and at slightly lower price points than TurboTax. Added benefit of brick and mortar locations if you really get stuck, but you’ll have to pay for that too. Shop the site
• Free Version: Again, if your taxes are fairly simple you can qualify for H&R Block’s free version. And it’s even more comprehensive than TurboTax’s free version in terms of what it covers.
• Deluxe ($49.99 for Federal + $36.99 for State)
• Premium ($69.99 for Federal + $36.99 for State)
• Self-Employed ($104.99 for Federal + $36.99 for State)
Online Assist: For each version, you can upgrade to Online Assist for the ability to connect online with a tax professional, but the prices will increase for each product.
Quick Take: While not quite as well known as TurboTax and H&R Block, still a credible alternative with comparable features. May not be as polished in all respects. Shop the site
• Free Version: Similar to TurboTax and H&R Block, TaxAct also offers a free version for simple filings, which it describes as “Simple filers with dependents, college expenses and retirement income.”
• Deluxe+ ($54.95 for Federal + $44.95 for State)
• Premier+ ($79.95 for Federal + $44.95 for State)
• Self-Employed+ ($109.95 for Federal + $44.95 for State)
While these are a few of the main tax preparation companies out there, they aren’t the only ones, so feel free to keep browsing. Find one that’s reliable and easy to understand.
And whatever your approach to paying taxes, you’ll want to be confident you’re doing them right. Working with a quality tax software can help make the process a little smoother without costing an arm and a leg. For a lot of people, it’s worth it.
What?! You still want more??
Pro Tip 1: Free File with the IRS – If you earn less than $69,000 a year, you can qualify for the IRS Free File program, which partners with tax preparation companies to offer software for free. If you earn more than $69,000 you can still file for free using the IRS fillable forms. You can check out both here.
Pro Tip 2: Buy your software early – If you do end up buying software, the tax preparation companies tend to increase their prices as tax time approaches (April), so it pays to start shopping early and also keep a lookout for discounts.