Getting the most from tax software

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Taxes » Tax Filing » Getting The Most From Tax Software

Are you prepared to spend almost a full day filling out your tax return? And we're talking a 24-hour period, not a standard eight-hour work day. That's the Internal Revenue Service's estimate of how long it will take the average taxpayer to complete Form 1040.

Sure, that includes the time it takes to pull together and sort through all your necessary tax receipts and records, learn about the Form1040, decipher its instructions, copy the completed form and send it in. But even discounting these ancillary duties, the IRS figures it still will take more than five hours just to fill out this most-popular income tax return.

And if you have additional schedules or tax credits to file, you might be measuring your tax time by the calendar instead of the clock.

Don't want to spend that much time with your 1040? Then tax-preparation software may be the answer. These packages promise to save you time and money by putting tax law and the forms you need at your fingertips. And some tax-prep devotees contend they can even save your sanity during tax season.

If you decide this year to join the millions who do taxes on a computer instead of paper, here are some ways to make the process go more smoothly.

Determine your needs

Not too long ago, there were only a few choices when it came to doing your taxes by computer. But nowadays, a new tax-prep package seems to appear daily between Jan. 1 and the filing deadline. That means you must do some homework before you pick a program.

First, evaluate your personal situation. Are your taxes relatively simple or do you have a lot of considerations, such as a freelance job on the side, that could add to or cut your tax bill and filing requirements? Not exactly sure? Then look for a program with lots of explanations that walk you through the process step by step.

If, however, you're an old hand at tax filing but want the software calculators that double-check your math, look for a package that lets you easily skip over sections.

And don't forget the technical requirements. Make sure your computer can handle the software: that it has enough memory, the proper operating system, etc. Nothing's more frustrating than getting a product home and finding out you can't use it.

Comparison shop

Once you've decided what you need from a tax-prep package, shop around. Don't waste any potential tax savings by overpaying upfront. Look not only at the software's base price, but also at any costs for options and upgrades.

Is the cost of electronically sending your federal return to the IRS included? Do you have state forms to file? Are they and their e-filing with your state part of the package or is there an extra fee?

Will the product let you complete more than one return, say the joint one you file with your wife as well as your son's 1040EZ?

Does the program provide assistance by phone, chat or e-mail to help answer any tax questions you might have? If so, is it available 24/7? You're likely to be working on your return on weekends or after usual business hours.

Be sure that as you evaluate the costs of different packages, you examine comparable options.

Start at the beginning

You've loaded the perfect program onto your computer and are ready to knock out that pesky return. Stop! Read the introduction.

Even if you're an experienced filer and have used the same program in past tax years, companies invariably tweak their products. They also usually offer tips on ways to more easily maneuver the new features. By taking a few minutes to familiarize yourself with the program, you'll likely save yourself some frustration later in the process.

Find the 'help' link

As you're learning about your new software, locate the "help" link. We're not talking the "tax tip" button, but rather the link that will take you to technical assistance staff. A sudden error message is never welcome, especially not when you're on line 57 of some detailed tax schedule.

Most software programs offer online and phone support for specific problems, as well as a basic troubleshooting guide as part of the package. Know how you can get to this help before you need it.

Run the final form check

You're done! Not quite. Before you print out or e-file your return, run the "review" option. This feature is included on most packages. On some, it's automatic as soon as you fill in the last line of the last form.

Keep in mind, however, that what a software program flags may not necessarily be an error. Many times the reviews also point out reminders or suggestions related to certain entries. Run the review, consider whether the suggestions will help (or even apply to) you and correct any legitimate mistakes. You'll be glad you, rather than the tax examiner, caught them.

Save your work

When you're finished, don't be in a hurry to shut down the software. Save your return as a file on your computer, as a printed copy or both. You'll want this confirmation in case the IRS doesn't get your return, or worse, has some questions about it. Most of us should keep our tax records for at least three years; hang onto them for six if you may have underreported income. That's how long the IRS has to take a closer look at your filings.

Check out other options

Finally, consider the possibility that you may not need to buy tax software at all. Free File, a joint IRS and tax software company program that makes online tax preparation and e-filing free to millions of filers, kicks off each filing season usually around mid-January. But because Congress did not approve tax changes until earlier in the month, the Free File program doesn't open for business this year until Jan. 30.

The free tax preparation and filing service is available to taxpayers whose incomes don't exceed a certain amount, adjusted annually for inflation. If Free File appeals to you -- and you qualify to use it -- you'll definitely save some bucks as well as time.

If you're not eligible for Free File, you still may be able to get a deal by filing online for a fee. You don't have to purchase the software; simply go to the software company's website and pay a fee to use the tax program. Your tax return then is filed electronically and your tax data is stored at the vendor's site.

But don't simply accept the first free (or discounted) tax-filing program you find. Even though you're not buying the software, you still need to make sure it fits your tax needs.



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