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3 Tips to Make Selecting Tax Software Not Taxing

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3 Tips to Make Selecting Tax Software Not Taxing

By Stephen Morris, SBA Official
Published: May 25, 2011

By Dennis Byrne

If you keep a clearly marked supply of cigar boxes with all your receipts and expenses in them you’ll be sufficiently organized come tax time. Right?

Wrong! This is 2011 for crying out loud. Savvy businesses scan, store and organize essential information and tax laws and regulations, depending on the business, can be complex.

As a small business owner, tax software packages can help make filing and paying your taxes easier, but how do you know which one to choose? Here are three tips to consider when selecting your tax software.

Choose Software by Correct Business Entity Type

When buying software, many people debate between purchasing the most expensive package, thinking it will definitely have what they want, or the cheapest, thinking it will get them by. This is not a good model when buying your tax software. Different software packages are designed to help different types of business entities.

Sole proprietors, consultants, contractors and single-owned LLCs have different forms than S Corps, C Corps, partnerships, and multiple-owner LLCs. In order to keep the price down, many software developers split their small business packages by business entity. The more complicated your tax situation, the more expensive the software gets (but still usually no more than $150-$200.)

If you simply buy the most expensive package, it may overcomplicate your taxes and not have the correct forms preloaded into it. If you buy the cheapest software it likewise, may not contain the tools you need to file. Take some time and research what software version will best suit your business.

A Simple Check Will Make Sure it is Compatible Software

Another possible issue is compatibility. Computer compatibility is not as big of an issue, since most software will run on recent Windows or Mac operating systems. Most compatibility issues are due to other software. There are standards, so even if you used specific software last year, most of the data should be able to be imported, but that will vary from software to software. 

Another issue is compatibility. Is your tax software compatible with your accounting software? Some software packages work well together, so you do not have to take time to retype in data.

Is Technical Support Included?

When buying any type of software, you should consider what technical support is included in the price. Many will offer 24/7 technical support on installing and troubleshooting issues, however you may want to consider how much tax support you receive. Well-known tax preparation companies have collaborated with the tax software companies to provide tax support. If you have a specific question on a deduction you can take or any other specific tax question, you can call someone and ask him or her. This support is not always included, so take into account the cost per call or per minute if you do need to contact them. And remember, when it comes to taxes IRS gets the final word.

Tax software lets you do your taxes anytime and without needing extensive knowledge of taxes. However, if you feel that you have a special circumstance, it may be better for you to go and get your taxes done in person by a professional. Having the peace of mind can be worth the extra cost. For help, see Selecting a Small Business Accountant.

If you have additional questions about filing and paying your taxes, post them on the Filing and Paying Taxes discussion board.

Related Resources

About the Author:

Stephen Morris

SBA Official

Stephen Morris is online media coordinator for the U.S. Small Business Administration where he manages digital outreach to the small business community.

Comments:

Choose Software by Correct Business Entity Type A Simple Check Will Make Sure it is Compatible Software Is Technical Support Included?
I wonder how much that software costs. It would be really great if gov tax office develop some certain software and then spread it across small businesses for free. Thank you!
This article will certainly be useful for freelancers.
I think so!
This blog is almost amazing for me... I'm getting what i was looking for.. Thanks you, Jimmy
I was looking for this information, and fortunate to have seen here, it is very nice and helpful to me. I wonder how much that software costs.
The biggest problem with such software is that sometimes it's cheaper to do all the calculations in the "old way" rather than pay for licensed soft :)
This article will certainly be useful for freelancers.
I would disagree with the article writer. Tax software that feeds off your basic accounting software WILL save you a lot of headaches. However the IRS code is over 2 MILLION pages, tax software will only take care of very straight forward returns. Best have someone on staff or a consultant review such a computer generated return who has SOME grasp of what those 2 million plus pages mean relative to you.
I wonder how much that software costs. It would be really great if gov tax office develop some certain software and then spread it across small businesses for free.

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