Tax prep software isn’t always a bargain, or the right choice for you. Here are 10 situations when hiring a tax pro could save you money, time, and trouble.Full article
Tax prep: the software challenge
February 23, 2018
If you bought a home last year, your tax return is going to be more complicated (boo!), thanks to new deductions (yay!). Tax prep software will help you get it right, and there’s a ton of it out there these days, but how do you choose? We reviewed the reviews — why reinvent the wheel? — and put together this quick guide for you.
Two things are clear: First, individual preferences and circumstances play a big role. It’s hard to judge which tax prep system is right for you based on someone else’s prep experience. Second, while some reviews focus on which system saves you the most money, it’s more important that the number be correct! An unexpectedly high refund might give you a frisson of anticipation … but then it should give you pause.
The top three softwares
You might find a software program you like better, but three rise to the top of just about everyone’s list: TurboTax, H&R Block, and TaxAct. All three have free versions, but unless your taxes are super simple, you’ll need to upgrade. Below is a summary of the pros and cons.
The number-once choice overall in the judgment of many industry experts, bloggers, and consumers for its ease of use.
- Accuracy guarantee
- Live support from TurboTax experts via chat if you get stuck
- Phone advice when you get a more expensive plan, which you might need
- Many people experience it as the most intuitive, clear, and uncluttered, especially for novice users
- Consumer Reports found it better on guidance related to the Affordable Care Act
- Allows you to import many documents
- TurboTax is one of the priciest software options, unless your tax return is very basic
- There’s a modest fee for audit support
Most reviewers find H&R Block’s product less user-friendly than TurboTax, but on the other hand they say that the customer service can’t be beat.
- Accuracy guarantee
- Unlimited free advice to all users
- More than 10,000 office locations nationwide, if you want in-person support
- Free audit support
- More free services can make this a better choice if you’re new to doing your own taxes
- People seem to find it less clear than TurboTax. For example, while TurboTax will select your filing status based on your answers to the program’s questions, H&R has you interpret the info it gives you and make the decision yourself
- Inflexible navigation
- Less importing capacity than TurboTax
This system is the most affordable of the three, and you do get less, but many people find it suits their needs just fine.
- Accuracy guarantee
- Most affordable
- No audit help
- Little support
- Less user-friendly
What to look for
Other tax prep systems might work fine for you, as long as they have the features you need and want. Here are the key features to keep in mind when you're shopping. Download the infographic below to keep a list of these key features on hand.
- Accuracy guarantee. Will they pay you the penalty and interest if there’s a calculation error?
- Customer support. Do they have a knowledge base? Live chat? Email or in-person options?
- Easy data import. Can you quickly get your W-2 and information from last year's return?
- Audit alerts. Will it alert you to red flags that might trigger an audit?
- Workable refund options. Do their refund options work for you?
Software vs. human
What about software versus human? A software program will never be as good as a skilled professional when it comes to complicated situations or gray areas. But “skilled” is the key word here. The US Government Accountability Office did a small undercover study a few years ago in which almost all of the paid preparers made mistakes! That might say as much about the challenges of the tax code as it does about the tax prep profession, but still …
If your return is going to be complex (as defined by you — everyone has a different threshold for throwing in the towel on this annual chore), you’ll want to call in a pro tax preparer. We recommend an enrolled agent or a CPA.
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Please note: The tax landscape is always changing. The information contained in this post is not intended as, and is not a substitute for, professional tax advice.
This post was originally published on February 20, 2017. It has been updated for content and accuracy.