Tax Prep Software Programs
Which Tax Software is Best for You?
You've gathered all your tax documents, brushed up on the latest tax changes, and taken a few deep breaths. Now you are ready to pick software to prepare your tax return.
After having reviewed all the top PC-based and Web-based tax software programs, I think picking the right tax software comes down to two things: how complex your tax situation is, and how much you want to spend on the software program.
Here are top picks for various situations.
Complex Tax Returns
You are self-employed, rent out residential properties, invest in partnerships, or have lots of stock trades. You need software with smooth and painless data entry and professional-grade number crunching. My top picks are TurboTax Premier ($59.95 federal and $24.95 state) and CompleteTax ($32.95, includes both federal and state). Both are Web-based tax programs. I would recommend, at least for now, staying away from the PC-based version of TurboTax, due to problems many customers are reporting about software updates. Overall, both TurboTax Premier and CompleteTax handle complex tax returns with relative ease. TurboTax Premier is especially well-suited for anyone who has rental properties. CompleteTax is brilliant at importing capital gains entries directly from Gainskeeper, which can be a real time-saver for active investors.
Straight-Forward Tax Returns
You have W-2s from your jobs, perhaps some bank interest, or mutual fund dividends.
You want to prepare your tax return quickly, affordably, and accurately. Is that too much to ask from the software vendors? Of all the tax software I tested, only Tax Act accurately calculated my estimated tax penalty. Granted, I didn't mind too much that the other tax software left this off my tax return, but I know from experience that the IRS would send me a letter asking me to pay.
So I might as well find out about it now. The Web-version of Tax Act ($7.95 to efile a federal return, and another $7.95 for a state return) is my top pick for tax preparation software because it is everything that tax software is supposed to be: quick, accurate, and affordable. TurboTax is also a good choice but opt for the Web-based version because of problems some people are facing when upgrading their software. If you qualify to use Form 1040-EZ, you should check out SnapTax, a new software product from the makers of TurboTax. SnapTax is a quick, easy, and affordable tax prep program. You can fill out a Form 1040-EZ in about 15 minutes, or e-file your tax return in under 30 minutes. It's worth a look.
Unique Tax Situations
There are lots of unique tax situations I can imagine, and no tax preparation software can handle everything. Some of the more well-known unique tax situations include investing in small business corporations (the so-called Section 1202 and Section 1244 stocks), net operating losses (that's where your total income is a negative number), and active day traders who use the mark-to-market method of accounting for their stock trades. I've got one top pick for you: find an experienced tax professional fast.
If you do want to try this on your own, you need to use TurboTax Premier. None of the other premium tax programs could handle all these advanced tax issues.
Free Tax Software
Or, at least nearly free. Various tax software companies, in partnership with the IRS, offer free tax software to customers who meet certain criteria. The best of these Free File programs avoid selling you unnecessary add-ons, offer free or low-cost preparation of your state tax return, and offer an easy-to-use software interface. The best Free File software program: CompleteTax. CompleteTax offers a clean, Web-based interface, and if you qualify for Free File, you can prepare and e-file your state return for no extra charge. Plus, CompleteTax avoids the sales gimmicks of the other Free File software websites.