Let’s take a look at the world of online tax calculators and gauge whether they are a reliable way to estimate your taxes.
Online tax calculators have emerged as a prevalent tool for many people to determine their taxes. As a result, a variety of calculator types have become available over the last few years. But are they as effective and efficient as advertised?
Tax Accuracy Varies Depending on the Online Calculator
Those who try out these calculators will quickly find that some are more accurate than others. How well it works all depends on the programming and the information added to the calculator. As a result, it is a good idea to always go with a tool that is official and not a knock-off.
The Official Tax Calculator Is Very Accurate
One of the most popular of all online tax calculators is the official IRS Calculator. This estimation tool uses rules set up by the IRS to calculate your taxes. It includes a variety of variables that other calculators don’t possess. As a result, a growing number of people are turning to it over other types, especially because it costs nothing to use.
However, other calculators are nearly as accurate. Again, it all depends on how well you input your tax information. If you fail to take into account important variables, such as the number of people you can claim as dependents, your prediction may be off. It also depends on the type of form you will fill out, and if you have multiple income sources to report, it may change the accuracy.
Factors that Influence Calculator Accuracy
The truth is many different factors seriously affect the accuracy of your online tax calculator. Some of these variables will be under your control. Just a few of the concerns that you need to take into account when using a tax calculator like this include:
- The programming of the calculator
- Reputation with past users
- The type of tax information you are inputting
- Rule changes that may influence the calculator
- Improper reporting in the past
- IRA account information
- Unemployment payments from that year
Before using your calculator, make sure you have all your paperwork in hand. You should research each calculator to decide on the best choice for your needs. Try to stick with a calculator that is highly rated by others. Don’t be afraid to get multiple estimates to get a better idea of what to expect this tax season.
Final Thoughts
So are online tax calculators a good way to estimate your taxes? It all depends on the one you use and the variables in your particular tax situation. You need to be as accurate as possible when inputting your income information. You also need to make sure you select the right amount of dependents and withholding items.
Remember that these calculators won’t give you a 100 percent accurate prediction, but they can offer insight into what you can expect — that means they can provide ballpark figures, which might help you plan. Try one out this season, but never rely on them to help you finish out your taxes. Only a professional preparation expert can give you the kind of accuracy you need to stay in the good graces of the IRS.
Get prepared for tax season now by getting in touch with our team at Incompass Tax & Accounting today.