Tax Preparation Software

Why should one use a tax preparation software?

People can make minor math errors that may cost them money on a return or cause a visit by the IRS. The tax software automatically does all the calculations if you input the correct values. Not only are calculations done for you, you can also easily update your tax return if you find out you have an extra deduction without going through all the drudgery of recalculating due to the changes. The number one reason I like to do my taxes with a software program is liability. If I do everything in my power to do my taxes correctly and the software makes an error, the liability is less on me and more on the software program. If millions of people are also affect by errors in the software program, then they cannot all be at fault. Tax preparation software also checks for red flags that might bring an IRS visit.

Is doing taxes on my computer safe?

The information is transmitted to the IRS electronic through e-filing. This information is protected by encryption. No information is 100% safe forever. Information is only safe for a period of time. The only unbreakable encryption is single photon quantum cryptography used by banks. Unless someone builds a quantum computer, your information will be safe for millions and millions of years. You’re more likely to have your information compromised at the starting and ending points than during transit. If a person steals your computer, then you can possibily lose your tax return. At the IRS, your tax return is going to wind up on a computer anyway, since they have to calculate your taxes and check it for discrepancies. You’re more likely to have your information spread around by the IRS losing a hard drive in the mail than through the tax preparation software. You can use tax preparation software with confidence.

What are the software options?

The federal government provides freefile for those with incomes less than $54,000 in 2007. If your income is greater there are many commercial options. The most popular ones are TaxAct, TaxCut and TurboTax from Intuit (INTU). For each of these three, you can fill out your information on their website or download a program to use on your computer. If you download the program, make sure to keep it updated with the latest software patches. My favorite is TaxAct, because it is free for federal taxes. They make their money on the deluxe version of their federal and state taxes.

What about state taxes?

Tax preparation software also do state taxes for an extra fee. California has a free CalFile service if your tax return is simple.

What if I need help?

The tax preparation companies provide phone support if you pay for their services.

What are my options if I don’t want to use software?

If your income is less than $40,000, elderly, don’t speak English well or are part of military, you can get assistance on your taxes from volunteers. See more information HERE.

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