Online tax preparation

Online tax preparation comparison chart for 2024

Online tax preparation explained

Getting a tax return ready always used to be something for a professional to take care of, or something you did without full understanding. What many people don’t know is you can now file a simple tax return online - for free or for a relatively low amount. The Internal Revenue Service prefers e-filing and online tax preparation sites help you collect together and submit the relevant information online.

Online tax software sites work in a similar way by asking for the information you need to complete the relevant forms and schedules. But they streamline and simplify the process – you don’t actually fill out the forms directly and you never see any of the official documents until right at the end. Instead you answer questions just as you would during an in-person interview. You put your responses in the correct fields and this information is used by the software to populate the forms.

In this way, online tax preparation forms are more accessible, easy to understand, and less stressful to fill out than the official set of paperwork. The wizard-like format is simple to use to get the results you need. You don’t need to understand how each aspect of your financial and home life affects your taxes, and you don’t need to understand tax jargon; you simply need to answer the questions.

If you get stuck, or need extra assistance, pop-up windows appear with links to help topics, or you can look through answers to common questions in the help section of the software. If you miss out an answer or section, an alert pops up. Some tax preparation tools don’t allow you to progress if sections are missing. Professional online tax software solutions are completely secure so that you can upload and input personal and financial information with confidence. Bank-level SSL encryption is standard when sending information online and e-filing. You also get a rundown of who accessed your account and when, so you see if there has been any suspicious activity.

If you file late, you are more at risk of an identity thief taking your information and filing on your behalf, collecting your refund before you get your real forms in. The best online tax software should be fully ramped up in terms of security, so your personal information is as tough as possible for criminals to access – at any point in the tax cycle.

Extra features that help you with the entire tax process include integrated audit support, the ability to import tax information from previous years or from competitor products, and extra information on health insurance as it affects your taxes.

What to look for in online tax preparation

What are the benefits of completing your tax return online over visiting a tax preparation specialist in person, or doing it yourself with a good old-fashioned pen and paper?

Compared to visiting a tax expert in person, it is significantly cheaper to file a form 1040EZ or 1040A online – in many cases it is actually free. It is also more convenient to complete your taxes online without the need for an office visit. Online tax software is easier to understand than IRS documentation, and the interface is easier to use. When choosing tax return software, here’s what you should be looking for.

Comprehensive and Tailored Tax Products

If you have only simply tax needs you will want to seek out one of the free versions of the online tax software programs. All the big players offer a basic free version of the software for filing forms 1040EZ and 1040A. In some cases, the state filing is also free, although you will normally pay extra per state.

For more complex tax needs, choose a service that provides the forms for rental property, investments, or small business, depending on your family circumstances. The good tax software packages help you choose which version is best for your needs – you tick boxes answering questions about your personal circumstances such as marital status, children etc., and the program leads you to the right product. Check that the forms and scheduling you need are included before you sign up for a particular product, as not every tax software package covers everything.

Integrated Mobile Apps

More and more people are completing their taxes in spare moments and in short bursts. It’s useful to have a linked mobile app to continue filling out your tax return or adding extra details wherever you are. An effective tax app replicates the features of the PC version and provides a seamless transition between platforms. Some tax software allows you to file on a mobile device while others only give you supplementary tax tools and information so check what kind of package you get before you sign up. A useful tool is the ability to take a photo of your W-2, upload it, and the data is automatically populated into the forms.

Robust Security

In terms of security features, many online tax software packages only allow you to enter your account with a single-use code or password that is sent to your phone or email. Some apps work with fingerprint passcodes if the Smartphone allows for this technology, which provides an extra layer of security.

Extra Features

Extra features that are useful additions to a tax preparation program include free audit support. If you do happen to be audited at any point during the year, many tax preparation companies include audit support within the package, helping you during the investigation.

You can also look for the ability to import data from past years’ tax returns. This feature is often available in the paid-for versions of the tax software and makes it easier to complete simple returns where nothing much has changed from year to year.

Ease of Use

The best tax preparation software provides a guided interview with a conversational, positive tone. The language is easy to understand and you are taken logically through a set of questions and fill-out boxes so the end result is all the information needed, in the right places. Good online tax sites are very easy to use, even when you have no idea about tax lingo or financial matters. The best software makes it simple to get the best refund and the most accurate return, without any prior tax knowledge.

While each tax preparation site has its own look they all use a similar process where you answer questions and fill out information in order to fill out the forms “behind the scenes”. The route you take will be different with each product, but the end destination should be the same.

Some tax preparation programs are more restrictive than others in terms of not allowing you to advance to the next section without fully completing the first – this safety feature minimizes the risk of mistakes and omitted details. Other programs let you move around to different points in the interview, bookmark places, return, and fill out the questions in the order you prefer. In general, the first style is better for the complete beginner and when you are more experienced you’ll probably appreciate the second option more.

Help & Support

Excellent tax software also provides excellent customer support, in the form of live chat, help from certified experts, phone support, email support, and/ or access to a comprehensive knowledge base and forums.

The best online tax software should help the person using the product, regardless whether he or she has any tax knowledge or experience. It should help the individual complete the forms correctly, and end up with the most accurate return.