Tax software makes filing returns easy. Although platforms are designed to be simple and easy to use, questions often arise that can cause some confusion.
According to two tax experts, some of the most confusing questions revolve around security, whether or not the software can accommodate all available credits and deductions, and whether or not it’s a good option for businesses.
Here are some frequently asked questions about tax software.
“The most common question I hear from people about tax software is whether it is safe to entrust their personal and financial information to it,” explains Geoff Knight, founder and CEO of File Tax.
Many tax software companies use encryption, multiple authorization, and secure servers to protect users’ data. It can also be safer than filing a paper tax return.
Paper archivers don’t have to worry about malware or data breaches, but paper also passes through a variety of hands, including the post office, mail carriers and centers at the IRS, Forbes reported.
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“The second is whether the software will catch everything or whether they will miss deductions that they didn’t know to look for,” Knight said. “Both questions come from the same place, namely a lack of trust in handing over something as sensitive as a tax return to a digital platform.”
Tax software can identify deductions and credits you may qualify for, but you could miss them if you enter information incorrectly or leave out important details.
Business taxes are often more complex and may require the expertise of a tax professional, especially when it comes to deductions, depreciation, payroll taxes, or estimated quarterly payments.
“If someone pays taxes on TurboTax, they’re just doing it (wrong, usually especially when it comes to business),” Tatiana Tsoir, CEO and CPA at Linza Advisors Inc., wrote in an email.
It might work for smaller companies at first, but it usually doesn’t last long. “They usually switch completely when their cases become more complex,” Tsoir explains.
“My recommendation is always to look for software that has been officially approved by the Internal Revenue Service, because that approval means the platform meets a strict set of security and accuracy standards,” Knight said.
Many programs participate in IRS Free File, which must be approved by the agency, and other commercial tax software companies, such as TurboTax and H&R Block, will certify that they are an IRS-authorized e-filing provider.
