Andrew Poulos
Editor, Online Tax Software
Andrew G. Poulos is an Enrolled Agent with over 18 years of accounting and tax experience.
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Online Tax Software
Finding the best online tax software can become an overwhelming task when faced with looming tax deadlines. Concern over the time needed to prepare and file taxes often leads to procrastination and last-minute filings. Many of the online tax software have made preparation and filing so simple that waiting around for an accountant to do the work no longer makes sense.
Buying Guide
1. Reviews
2. Features
3. Consumer
Profiles
Profiles
4. Product Editions
Chapter 2: Features
What Online Tax Features Matter and Why?
Facilitation
Facilitation refers to the features that help simplify the tax filing process. Facilitation is made up of common features like step-by-step guidance, deduction discovery, and a life events advisor. However, the best online tax software will provide tools to help you identify industry-specific deductions, appropriately process your charity donations, and use interview guidance, a process of asking a series of questions and mapping the answers directly into the correct tax forms. Solid Facilitation features are important as they alleviate much of the guesswork and ensure filing taxes does not become overly complex.
Asset Depreciation
The software compares asset depreciation methods and indicates which option will be most favorable.
Business Owner Deductions
A tool exists to help you identify and process deductions associated with owning and operating a business.
Charity Donation Tool
A tool exists to help you identify, value, and process charity donations.
Deduction Discovery
The software searches available deductions to ensure you get the maximum refund possible.
Industry-Specific Tax Deductions
The software provides a walk-through of industry-specific deductions.
Information Transfer
You can pull information from previous tax forms directly into current year forms.
Interview Guidance
The software asks you questions and uses your answers to automatically complete the appropriate forms.
Life Events Advisor
The software has functionality that helps you identify major life events and understand how these events impact your taxes.
Prior Year Returns
You can access your return from a previous year.
Reminders
You can flag or bookmark any areas of uncertainty and return to them at a later time.
Rental Property Tool
A tool exists to help you identify and process deductions associated with rental properties.
Step-by-Step Guidance
The software provides interfaces that guide you step-by-step through the tax preparation and submission processes.
Disbursement
Disbursement addresses the different ways tax refunds can be distributed. The most common methods of receiving tax refunds are through direct deposit or via check. Additional disbursement methods include pre-paid cards and purchasing U.S. savings bonds. Having the ability to distribute refunds into multiple accounts is a convenient feature found in the best online tax software products. For those looking forward to a tax refund, Disbursement is a highly important category.
Check
Your tax refund can be disbursed via check.
Direct Deposit Refund
Your tax refund can be deposited directly into your bank account.
Multiple Account Deposit
Your tax refund can be deposited directly into multiple accounts.
Pre-Paid Card
Your tax refund can be disbursed via a pre-paid card.
Saving Bonds
Your tax refund can be used to purchase savings bonds from the U.S. government.
Accuracy Tools
Accuracy Tools includes the features and guarantees collectively designed to confirm taxes are accurate throughout the preparation and filing process. Some of these features include a tax calculator, refund double-check, and a real-time balance meter. For those concerned about being audited, audit risk identification is a useful feature that will indicate audit risk and recommend solutions to minimize it. The best online tax software provides accuracy and maximum refund guarantees. Accuracy Tools is an important category, especially to those who lack confidence in the tax filing process.
Accuracy Guarantee
The software company guarantees your taxes are accurate.
Audit Risk Identification
The software indicates your audit risk and recommends solutions to minimize the risk.
Double-Check Returns
The software automatically double-checks your tax return to ensure it is accurate.
Maximum Refund Guarantee
The software guarantees you will get the maximum refund possible.
Prior Year Comparison
The software automatically compares the current tax return with the previous year's return and highlights any differences.
Real-Time Balance Meter
The software provides a real-time meter displaying the balance of your refund or the amount you owe.
Tax Calculator
The software has a tool that allows you to estimate your tax refund or the amount you will owe.
Deductions
Deductions refers to the types of deductions the online tax software is able to accommodate. Having the ability to file standard or itemized deductions is a must. Processing charity donations is also common functionality. Additional deduction discovery resources are in available for those who own businesses or rental properties. Identifying deductions is an important aspect of tax filing and can make a big difference in the amount of tax owed.
Business Owner Deductions
The software identifies deductions specifically for business owners (Schedule C).
Charity Donations
The software allows you to deduce charity donations.
Depreciation Summary
The software allows you to enter depreciated items and provides you with summary figures (form 4562).
Itemized Deductions
The software allows you to itemize your deductions.
Rental Property Deductions
The software allows you to deduce rental property deductions (Schedule E).
Standard Deductions
The software supports the standard deduction method.
Vehicle Deduction Methods
The software allows you to deduct actual expenses or standard mileage rates for your vehicle.
Filing Options
Filing Options primarily refers to the various methods of filing federal and state returns. Online tax software generally includes the ability to electronically file (e-file) federal and state returns. Having the ability to prepare prior year taxes, and access, prepare, and print copies of amended tax returns are convenient features that will be found in the premier online tax products. Understanding what filing features will be needed and what software can best accommodate those needs is an important part of the tax preparation process.
Amended Tax Returns
You can access, prepare, and/or print paper copies of amended tax returns.
Costs Deducted From Return
Any fees associated with preparing and filing your taxes can be deducted from your tax refund.
E-File Extensions
You can e-file an IRS tax extension.
E-File Federal Returns
You can e-file your federal tax return.
E-File State Returns
You can e-file your state tax return.
Free Federal Edition
You can e-file your federal tax return for free.
IRS Confirmation
You receive confirmation that the IRS has received your e-filed tax forms.
Prior Year Filing
You can access, prepare, and/or print paper copies of prior year filings.
Filing Status
Filing Status is a straightforward category that specifies the filing status types the online tax software is able to accommodate. Possible filing statuses include single, head of house, married filing jointly, married filing separately, and qualifying widow(er). Filing Status is an important category to get right, but confirming that the necessary filing status is available also makes it easy to navigate.
Head of House
The software supports filing under head of house status.
Married Filing Jointly
The software supports joint filing for married users.
Married Filing Separately
The software supports separate filing for married users.
Qualifying Widow(er)
The software supports filing under qualifying widow(er) status.
Single
The software supports filing under single status.
Learning Materials
Learning Curve includes the available resources intended to help understand online tax software and troubleshoot problems independent of a support representative. The best online tax software will include an active forum and a knowledge base full of useful articles. Learning Curve is an important category for those who like to teach themselves and prefers to resolve problems on their own.
FAQ
The company provides a list of answers to frequently asked questions.
Forum
The company provides an interactive forum where users can post questions and answers.
Glossary
The company provides a glossary of tax terms.
Knowledge Base
The company provides a knowledge base of detailed help articles.
Video Tutorials
The company provides video tutorials.
Support
Support refers to the types of resources the online tax company provides to answer questions and resolve problems. Many of the best online tax software products have been streamlined to handle common filings without complications, making comprehensive support less necessary. However, when a problem does arise, knowing assistance can be acquired through chat, phone, or email is comforting. For those who prefer face-to-face interactions, selecting an online tax software that also operates retail locations would be a solid choice.
Audit Support
The company will provide audit support if you get audited in the future.
Email/Tickets
The company has an email or ticket system dedicated to support.
Live Chat
The company offers live chat support.
Phone
You can contact the company by phone to get support.
Retail Locations
You can get in-person support at local retail locations.
Social Media
You can contact the company with questions through social media websites.
Video Conference
You can prepare your taxes with a tax professional through a live video conference.
Data Importing
Data Importing encompasses the types of forms that can be uploaded and imported into the software. Having the ability to import W-2 and 1099 tax forms is the most common. However, some online tax software will accommodate importing tax forms prepared by an alternative company. Data Importing is a less important category, because it is more of a convenience as opposed to a necessity.
Alternative Preparer Import
You can import forms prepared by other companies or software solutions.
Automatic Import
You can automatically import your tax forms from partner organizations.
Import 1098 Forms
You can import 1098 forms.
Import 1099 Forms
You can import 1099 forms.
Import Prior Year Returns
You can import your prior year tax return.
Import W-2 Forms
You can import W-2 tax forms.
Mobile
Mobile identifies whether the online tax software provides a mobile application and which platform the application is designed to operate on. In general, functionality on mobile tax applications is limited. However, for those determined to complete their taxes on a mobile device, the best online tax mobile applications are currently capable of processing basic tax forms.
Android Application
You can download a native Android application of the software.
Apple Application
You can download a native Apple application of the software for use on your iPhone or iPad.
Chapter 3: Consumer Profiles
Who Uses Online Tax Software?
Deal Seeker
A deal seeker is interested in preparing and filing taxes for the lowest possible price. The complexity of tax needs for the deal seeker can vary, but a Federal Free Edition and a maximum refund guarantee are good minimum requirements. A referral program and any additional benefits will also catch the deal seeker’s eye.
Military Filer
A military filer is a member of the United States Armed Forces and typically has fairly simple tax needs. Some online tax software products offer members of the military discounted rates for e-filing federal and state taxes. In some cases, e-filing taxes is completely free.
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Heavy Investor
A heavy investor generates the majority of income through financial markets or other investments. Heavy investors have relatively complex tax needs and require an online tax software capable of handling a wide variety of circumstances. Heavy investors value tools that assist with deduction discovery, charity donations, rental properties, and allow itemized or standard deduction filings.
DIY Filer
The DIY filer doesn’t mind going to work and preparing and filing their own taxes. They will do their own research to find the product that has the functionality they need at the price they want. They typically value an active user forum, a life events advisor, deduction discovery tools, and audit risk warnings.
Senior Citizen
A senior citizen generally does not have a complicated income and would probably not be interested in dealing with a highly complex online tax software. These tax filers will value step-by-step guidance and basic interfaces. Easy-to-access phone support is ideal, and retail locations will also be a big plus.
Multi-Income Filer
A multi-income tax filer might have a steady day job, own a rental property, and maybe even dabble in the stock market. Having multiple income streams is not unusual, but it has the potential to make filing taxes a little more complex. Multi-income individuals will value an online tax software with high functionality that includes strong deduction discovery tools, a solid user forum, and reliable customer support.
College Student
A college student has basic tax needs and can generally complete their taxes using the most common forms. College students are primarily interested in keeping costs low, which means a Free Federal Edition is a must. In addition, they tend to be more tech-savvy and would be much more likely to file taxes on a mobile app and get support through company social media sites.
Newbie
A newbie is a first-time tax filer, or someone with little knowledge of the tax preparation and filing process. Newbies know they need to get their taxes done, but they have no idea where to start. These tax filers will value step-by-step guidance, interview guidance, and will appreciate video tutorials, live chat, and other learning materials and support resources.
Small Business Owner
A small business owner with a handful of employees will have unique tax needs. This is someone who may need to file hourly employee taxes, deal with 1099 forms, process their own taxes, and maybe chip in to help Mom or Dad. Industry-specific and business-owner tax deduction discovery tools will be critical features. Overall, a versatile and competitively priced software is what the small business owner is all about.
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Chapter 4: Product Editions
What are the Different Editions of Online Tax Software?
Most online tax software products offer multiple editions based primarily upon the complexity of the taxes being filed. Although the number of editions, naming conventions, and precise definitions may vary between companies, there are generalities that can be made and applied across all the products in the industry.
Federal Free Edition
The Federal Free Edition usually provides the resources to prepare and e-file both federal and state taxes and is generally utilized by those with the most basic tax needs. The federal e-file is typically free, but be prepared to pay to e-file state tax forms. Some of the most common supported forms include W-2, 1040, 1040A, and 1040EZ, but many online tax software include functionality to complete a fairly comprehensive list of tax forms.
Basic Edition
The Basic Edition includes all the features found in the Federal Free Edition with the inclusion of access to basic deduction identification tools and improved support. Additional functionality also generally includes the ability to import data and to access prior year returns. Most software also extends support to most major forms at this level.
Deluxe Edition
The Deluxe Edition will generally see improvements in the ability to identify deductions through industry- or occupation-specific deduction searches. Tools to help navigate major life events improves, as well as the ability to process charitable donations. Online tax software at this level will also begin to provide assistance with stocks and other investments, and some even provide tools to help identify audit risk.
Premium Edition
The Premium Edition incorporates the features of all other editions and will generally grant access to the full functionality of the software. Deduction assistance expands to include rental properties and other business-specific tax deductions. Advanced calculators and additional investment resources are also generally available at this level. Premium Edition customers can also expect the highest level of customer service and audit support should the need arise.
About the Editor
Andrew Poulos
Online Tax Software Editor
Andrew earned his Bachelor's Degree in Accounting and Real Estate in 1994 from Georgia State University and founded his firm, Poulos Accounting & Consulting, Inc. in 1995. Andrew is an Adjunct Professor for Auburn University, teaching for the Continuing Professional Education Department. He is a speaker for the Legacy Series, an organization of national speakers in the accounting and tax industry. Andrew is a published author with articles published in various publications.
