Tax Preparation Software Guidance
Tax preparation software is very popular for a good reason because it is inexpensive or even free. We recommend using tax preparation software for simple tax returns.
- You have one W-2 and some bank interest
- Your only deductions are property taxes, mortgage interest, and charitable contributions
- You have medical expenses and/or dependent care expenses
- You mainly earn social security income
- My spouse is a teacher and we can write off educator expenses
If you have other items to report, then we recommend you get your tax returns prepared by a professional. Tax preparation software asks many questions to prepare your tax return. You may not know how to answer some of the questions. If you answer a question incorrectly, then the tax return will not be correct and you’ll never know it.
We had a client that got into IRS trouble because they answered a question incorrectly in the tax preparation software. We reviewed the tax return and noticed employee expenses were claimed twice. The husband and wife each deducted employee expenses. We asked questions about the employee expenses. Their response, only the husband had employee expenses. Ouch! If they got their tax returns prepare by a trusted tax preparation company, this wouldn’t happened. The client paid a high cost for their mistake.
Consider using a trusted accountant to prepare your returns if you have any of these transactions.
- Employee expenses
- Rental real estate
- Self Employed or Business
- Education expenses
- Many stock transactions
- Debt cancellation
- Sale of your home
- Health Savings Account
- Residential Energy Credit purchases
Tax preparation software is an inexpensive option for simple tax returns. We do not recommend that you use tax preparation software if your return is somewhat complicated. Accidentally making a mistake on your tax return can be costly. Also, it is comforting to know your tax return was prepared correctly by a professional.