What You Need to be Aware of With Online Tax Preparation Applications

Online tax preparation applications look easy, but there are problems lurking within.

online tax preparation applicationsTax preparation applications make a lot of great-sounding promises in advertisements. Claiming to make filing your taxes a breeze, as well as helping you get the biggest refund ever, they sound like a miracle product. These products claim to provide numerous advantages, many of which do sound tempting to busy individuals, such as:

  • Tax preparation applications can make filing your taxes fast. Some applications claim you can file your taxes in approximately 30 minutes. Come home from work, eat dinner, and figure your taxes before you watch a movie and go to bed. They make it sound that simple.
  • Tax preparation applications claim to be easy to use. These programs promise to walk the taxpayer through the whole filing process one careful step at a time. If you need any additional help with your taxes, these companies offer special services to provide you with answers.
  • These applications are affordable and cheaper than hiring a licensed tax professional. However, in the past, there have been customer complaints about hidden fees.

They Won’t Work For Everyone

Common sense tells us that one solution will not do a good job in every case. Although these tax application companies claim their products will save taxpayers a lot of time and money, keep in mind that they work best for those who have extremely easy tax returns to file – such as those with one steady job, no assets and no property.

Many individuals should not use these applications. Here are a few of those who should opt out of online tax preparation applications.

You Own a Business

If you are an entrepreneur, tax preparation applications can be a bad option. Most business owners know how to run a company but don’t possess adequate knowledge of the tax laws to be able to file correctly. A business tax return can get very complicated. To avoid trouble with the IRS, a business owner needs the advice and guidance of a licensed tax professional.

You Are Self-Employed

Self-employed individuals should steer clear of tax preparation applications. Without sufficient knowledge of tax law, they can make a lot of costly mistakes, especially when estimating quarterly payments to the IRS. When you hire a professional tax preparer, they will calculate the correct amount of your quarterly payments. You will be able to avoid underpaying your taxes and a possible IRS audit.

You Have Lots of Itemizations

When you have a lot of deductions to declare on your tax return such as significant charitable donations, work expenses with your job, mortgage interest, childcare expenses, or medical costs, it would be better to turn the job over to a licensed tax professional. Any significant changes in your life such as the death of a spouse or a divorce will also create an intricate tax return that’s well beyond the scope of tax preparation applications.

You Have Significant Assets and a Complicated Investments Portfolio

When you move money around during the year, this can have quite an impact on your tax return. Tracking a lot of financial activity can create a complicated situation that requires a professional to map it all out for the IRS. Don’t attempt to figure out this kind of tax return on your own unless you have the specialized knowledge.

Hiring a Professional

When you hire a certified tax professional, you can rest assured they can master any complex tax situation and grant you the peace of mind you deserve. A tax professional may be more expensive than purchasing tax preparation applications. However, spending more for better service will save you heartache and money in the long run by making sure there are no mistakes on your tax return. You will also be safer from the possibility of an IRS audit. Also, your tax professional will provide mediation if a problem occurs.

Categories: BUSINESS TAX STRATEGIES.