* For simple tax returns only. Not all taxpayers qualify.
Tax software is software that’s designed to walk you through the process of calculating and filing your taxes. It can do many different things, including:
While tax software isn’t a replacement for a professional accountant, it simplifies the process of figuring out your taxes on your own. Also, using tax software is typically much cheaper than going to an accountant.
Notably, most modern tax software is sold on a subscription or annual basis. You’ll pay a small amount to use the software this tax season and then pay again next year. This works well because tax software has to stay up to date as state and federal tax laws change. Every year, the software will have updated tax tables, mileage rates, and other factors that can impact your return.
Picking which tax software is right for you comes down to several different factors.
Complexity of your return
The first thing to consider is how complex your tax return is. If you work at a company and don’t have a side business, your return will likely be relatively easy. But if you have multiple income streams or own a business, your return will be much more involved. It’s crucial to ensure that the tax software that you choose can support all the calculations and forms that you need.
User experience
Another thing to consider is how experienced you are at doing your own taxes. Certain tax software is designed to be beginner-friendly and will guide you through every step of the filing process. For example, you might be presented with questionnaires rather than blank forms to fill out.
However, more advanced tax software might assume that you’re already familiar with common tax forms. You’ll need to be comfortable figuring out what forms you need and how the different tax worksheets fit together.
Support options
Whether you can get support from a professional accountant when you need it is also an essential factor to think about. Some tax software platforms offer free advice, while others have accountants standing by for an additional fee. Popular software packages may also have online forums where you can get help from other users.
Cost
The point of using tax software as opposed to an accountant is to save money. So, cost matters when comparing tax software. Be sure to check whether there are additional fees for filing with your state or the federal government and whether there’s a money-back guarantee if you can’t make the software work for you. Many tax software platforms will let you calculate your taxes for free, and you only pay when it’s time to file.
Tax software works by taking the tax forms from the IRS and transforming them into a format that makes sense to everyday people, not just tax professionals. Most tax software use a series of questionnaires to understand your financial situation, income streams, and potential deductions. Based on your responses, the software will determine what tax forms you need to submit and help you fill them out.
Depending on what software you use, you may never even see the tax forms that are submitted to the IRS. Instead, you’ll simply be asked to answer basic questions and provide numbers for your income and expenses. Once you’re finished, the software will display a user-friendly summary of your income, deductions, and tax liabilities.
Finally, tax software can file your taxes electronically on your behalf. Most software can file both federal and state taxes. You can make a payment directly through the software if you owe money, as well as enter your payment details if you’re eligible for a refund.
Let’s take a closer look at a few of the most common forms that individuals will file with their taxes.
1040
Form 1040 is the individual income tax return form. In essence, it’s the master form that every individual in the US needs to submit to the IRS. This form will have your name and address, your income, the sum of all your deductions, the total tax that you owe, and the total that you’ve already paid through quarterly taxes and withholdings. At the end of Form 1040, you will include your payment details to pay your tax bill or the details for how to receive your refund.
W-2
Form W-2 is provided by your employer. It lists your wages and any other compensation that you’ve received over the past year, including tips. It also lists your federal and state withholdings, which is money that you’ve already paid out of your salary toward your tax bill. If you don’t have Form W-2, contact your employer—you should get one W-2 from each employer that you’ve had over the past year.
1099-INT
Form 1099-INT is where you report interest income. This is typically used to report interest on money that you have in the bank.
1099-DIV
Form 1099-DIV is where you report dividend income. This is typically used to report dividend payouts from stocks.
1098-E
Form 1098-E is where you report interest that you paid on a qualified student loan so you can deduct this interest from your taxes. This form is provided by your loan servicer if you paid more than $600 in interest over the past year.
1098-T
Form 1098-T is where you report qualified educational expenses, such as tuition, enrollment fees, and course materials. These expenses are eligible to be used as deductions. Form 1098-T is provided by your college or other educational institutions.
Schedule A
Form 1040 Schedule A is used for itemized deductions if you decide not to take the standard deduction. It includes categories for medical expenses, taxes, interest payments, charitable gifts, losses due to theft, work expenses, and miscellaneous expenses.
Schedule C
Form 1040 Schedule C is used to report your profit or loss from your business if you are self-employed and have a sole proprietorship. Most people who file Schedule C also need to file Schedule SE, which is used to calculate self-employment taxes.
Should I use tax software or hire a CPA?
Whether you should use tax software or hire a tax professional comes down to whether you want to do your own taxes or have someone else take care of them for you. Tax software makes doing your own taxes easier, but it still requires effort on your part.
What day are taxes due in 2024?
The deadline for filing your 2024 taxes is April 15, 2024.
What happens if I miss the tax deadline?
If you miss the deadline to file your taxes and haven’t filed for an extension, the IRS can charge you a penalty. The penalty is 5% of the taxes that you owe for each month that your return is late, up to a maximum penalty of 25%.
If you’re nervous about completing your tax return, TurboTax’s flexible services could help put your mind at rest, as well as saving you significant time and effort. With 3 plans, the platform allows you to complete your taxes yourself or receive guidance from its advisors. TurboTax offers an impressive audit guarantee service, which will provide you with free support should your return trigger further scrutiny from the IRS. Likewise, the company promises to pay any penalties you face as a result of a mistake on its part, plus interest. Whether TurboTax is a worthwhile investment for you will probably come down to your level of confidence in filing your tax returns or the complexity of your affairs.
It's important to keep in mind that roughly 37% of filers qualify for filing a Form 1040 return with limited credits, meaning they can submit their tax returns using only the IRS Form 1040, without the need to attach additional forms or schedules. This eligibility simplifies the filing process for these taxpayers.
If you’re nervous about completing your tax return, TurboTax’s flexible services could help put your mind at rest, as well as save you time and effort. The platform allows you to complete your taxes yourself in a matter of minutes. While TurboTax has a poor rating on Trustpilot, it does offer an impressive audit guarantee service, which will provide you with free support should your return trigger further scrutiny from the IRS. Likewise, the company promises to pay any penalties you face as a result of a mistake on its part, plus interest.
With the free version of its software, you will be able to easily file simple returns and get the maximum refund.
H&R Block is a large tax preparation company offering both free and paid tax filing software. The software is highly rated, earning a 4.4-star average review among 350,000 past customers, and is priced competitively against other offerings.
Its 4 plans include a $0 version for students and W-2 employees with uncomplicated tax returns, a $29.99 offering for those who want to itemize their deductions (to claim HSA contributions and dependent care deductions), a $49.99 option for investors and landlords to report investment and rental income, and an $84.99 plan for solopreneurs, gig workers, freelancers, and the self-employed. For state filings, the company charges $0 for the free plan and $36.99 per state on all paid plans. Clients who want extra help can also purchase live tax help for $39.99.
H&R Block also features two mobile apps—a year-round version for on-demand tax advice and a tax prep app for tax season. Clients who want to engage in longer-term tax planning can also pay for personalized, 1-1 services with a tax professional, who can ensure clients make tax-optimal decisions throughout the year.
clicked on a tax filing service this month
