taxes (Photo credit: 401K)
(ARA) – Instead of paying a professional hundreds of dollars to do their taxes, an increasing number of U.S. taxpayers are doing it themselves. The IRS reports that 9.8 million tax returns were self-prepared and e-filed last year, a 14.2 percent increase over the previous year.
The trend toward self-preparation is in part due to the high price of professional tax preparation. Though fees have remained steady over the last few years, the National Society of Accountants’ 2011 survey reports the average fee for a Form 1040 with Schedule A plus a state return was $233, and $128 for a non-itemized Form 1040 and state return.
Not only have more affordable do-it-yourself tax preparation software solutions become easy enough for tax novices to use, they allow consumers the luxury of doing their taxes at their leisure from the comforts of home. Products have also made getting answers and one-on-one help quick and easy.
Though the look and feel of user interfaces vary some across brands, the key differentiator between tax preparation software is price. Products range from free to more than $100, but most taxpayers should find the lower-priced products more than adequate. Several brands even offer free federal products, though most only include forms for “simple” taxes, meaning forms for Form 1040EZ and non-itemized returns. TaxACT is the only free federal product that includes all e-fileable forms for simple and complex returns. If you’re not sure what forms you need, start with the free product. You can upgrade if you need or want to later. State returns usually cost extra.
Besides product fees, look at any fees for tax help and electronic filing of your return. Fees for one-on-one tax and technical help vary widely. While some brands offer “free” help, their software costs more. You pay for help whether you use it or not. Help via email isn’t widely offered, but it is free with all TaxACT products, including Free Federal Edition. Most product fees include e-filing, but there are slight variations. You may find that adding a fee or two onto the product price still costs much less than an all-inclusive product. Take a close look at product websites and consider checking out expert reviews in top technology and software publications.
Online tax preparation solutions are the most widely used since they’re accessible wherever there’s an Internet connection and Web applications are more commonplace. Some are even iPad optimized. Downloadable software is still popular but on the decline. Unlike its digital counterpart, downloadable software typically allows users to prepare multiple returns – a good option for users who prepare returns for friends and family.
The beauty of both digital and downloadable products is the interview that breaks complicated tax forms down to a simple Q&A format with explanations and help along the way. The program does the math and completes the appropriate forms. If you want to see what’s happening behind the scenes, most solutions allow you to view your forms as you go and/or at the end of the interview before you file. Best of all, the product will save your information if you want to stop and finish later.
Some products offer extra tools that can help save time and increase your refund. Popular “extras” include data import from last year’s return or investment data files. If you itemize deductions and donated household items, there are tools to help determine the fair market value of the items and calculate your total deduction. Many products also offer extra guidance through major life changes.
Whether you’re new to tax preparation software or switching brands, don’t be afraid to take a couple products for a test drive. Paid products typically don’t require payment until you print or e-file, and many brands allow you to try the products without creating an account. Downloaded software often comes with a money-back, no-questions-asked guarantee. If you have time to spare, you could enter your data in two products and compare results.
Digital and downloadable products have made doing your own taxes easy, fast and affordable. Visit www.irs.gov for the latest tax information and learn more about TaxACT at www.taxact.com.
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