Should You Use Tax Preparation Software?

With Today's Software, Should I Do My Own Taxes?

Should You Use Tax Preparation Software?
March 15, 2017

Tax preparation software has improved significantly over the past several years, and more and more people are using it to file their own taxes. If you are debating whether doing your own taxes is right for you, consider the following factors:

  • Simplicity of your Tax Situation – If you have relatively few deductions, few sources of income, and limited investments, tax preparation software should be able to handle your taxes with relative ease. If you have a complex tax situation with business interests, rental properties, multiple investments, or estate issues, it's probably best to use a CPA or licensed tax preparer.

  • Familiarity With Taxes – The less familiar you are with taxes, the more a CPA will have to ask questions about your situation to help you find applicable deductions. Most of the tax software programs have information prompts and warnings based on the information you supply, with varying degrees of straightforward language and ease of use. An intuitive CPA who knows you and your situation and has worked with you for years is best, but a less inquisitive CPA may not be any better than the tax software (and could arguably be worse).

    If you have a greater familiarity with taxes, you are more likely to input information into the software correctly and spot potential errors and numbers that do not look right.

  • Time – For simpler returns, this is not an issue. If you have a complex tax situation, it may take you considerably longer to do your own taxes – and you are also more likely to be a busy professional. Is this the best use of your time? If you are already using a banking software program like Quicken, it may be quick (pun intended) to export the information to a tax program, but that doesn’t mean you will get all of the deductions to which you are entitled.
  • Personal Service – Virtually all of the software vendors have phone or chat support, but the reviews of these services are all over the map. If personal service and contact is important to you, it's hard to beat the services of a quality CPA. They offer year-round advice and help you keep things in order for the next year's taxes.

  • Expense and Risk Tolerance – In all cases, a CPA will cost more than tax preparation software, but if you have an extremely low tolerance of risk, you should probably use a CPA for peace of mind.

    While there are free or introductory versions available for most software vendors, you may need the upgrade for your situation. Check the details of each package to determine what level of expense and features you are comfortable with. Some offer free come-ons like free federal filing, neglecting to mention that they will charge a hefty amount to file your state return based on the same information.

  • Audit Support – Audit support is available from most of the software companies, although it may require an additional fee. If audit support is important to you, check individual companies to see what levels of support are offered, whether they are offering advice or representation, and whether they outsource support. Your CPA may provide audit support as well, but terms can vary and the expenses are likely to be greater.

If you are just biased against software, you should realize that CPAs use software too – just far more complex and sophisticated specialized software.

Head-to-head comparisons of CPAs versus software, and many software reviews, are available online. Again, the results are all over the map. Tax situations are so different that direct comparisons with one set of circumstances may not compare to yours.

If your taxes are relatively complex and you still aren't sure what to do, try one of the free or less expensive versions of tax software and get a feel for your comfort level with the product. Compare the results that you get with a trusted CPA, and let that guide you in succeeding years.

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Jay | 03.06.15 @ 21:05
A great option is It is completely free for state and federal returns and can handle almost any tax situation. There is also no income limit like the IRS' free file program.
Carla | 03.16.16 @ 21:06
I am still not confident enough to do our taxes yet because of our itemized deductions but maybe in a year or so.
Steffanie | 03.16.16 @ 21:08
I help my kids with their taxes, but our own personal taxes are too complicated for me.
Beverly | 03.16.16 @ 21:09
If our taxes weren't so complicated we could do it ourselves.......I miss the days of simple taxes. We do however do the taxes for our parents to save them money
Tina | 03.16.16 @ 21:09
I've always done my own taxes. Even one year when we had a move and had to file in multiple states and included several different sources of freelance (read: self-employment/ double taxed for Social Security) income. The tax prep softwares and sites out there now really do walk you through the process very well.
Erin | 03.16.16 @ 21:10
We have run into a minor snag this year with doing our own taxes. It has help us up from submitting them just yet, but I'm really glad that we did them ourselves instead of handing them off to someone else, because we understand what the situation is while a tax service would have no idea of the circumstances. There are trade offs either way you choose to do it.
Jonathan | 03.16.16 @ 21:11
I'd say if you don't have alot of in depth expenses or forms, 100% do your own taxes. No use giving someone else that money.
Jo Ann | 03.16.16 @ 21:13
I use an online tax software, which is fine for my simple tax situation. But I feel when you have complex situations, and multiple credits it is always smart to at least get a review by a tax specialist. And if complex returns get audited it is nice to have someone to go with you that is knowledgeable.
Heather | 03.16.16 @ 21:15
If I had a simple tax return I would totally do it all by myself. But I don't trust myself with all the deductions we have. So I leave it for the professionals.
Elaine | 03.16.16 @ 21:21
I'm not confident in Doing my own because of how completed ours can get. If it was just the basics then I could. Don't want the risk of making a mistake.
$commenter.renderDisplayableName() | 03.18.18 @ 23:35

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