Master Your Tax Software With These 7 Simple Tips

We say it every year because it’s true: Tax preparation software can make your annual trek through the 1040 easier and faster. It can also help you get a bigger refund (or pay less) by digging deeply for all allowable deductions. These sites guide you step-by-step through the process of entering all of your income and expenses. And they do so by using simple, understandable language and lots of taxpayer help. They’re designed for individuals, families, and sole proprietors, not financial experts. 

You can improve on the experience they provide by following a few simple guidelines. Below are seven ways to make your tax prep hours more productive and less frantic.

1. Track Your Tax-Related Income and Expenses All Year

If you’re self-employed or have a side gig, you’re going to need accurate records of your income and expenses. It’s a good idea to set up a year-round filing system for this information. If you’re collecting paper receipts, dedicate physical file folders for them by month or type. As receipts come in, write notes on them so you’ll know how to assign them to the correct IRS categories on the Schedule C. Keep them separate from any documentation about your income.

If you’ll be filing a personal return, label a file folder where you’ll store all of the forms that will come in during the months preceding the filing deadline, such as W-2s, 1099s, and property tax records. 

2. Record Your Income and Expenses Electronically

Your tax preparation will take a lot less time if you use personal finance software that’s designed to import transactions from online financial institutions and store them in registers. You can then categorize income and expenses and run reports at tax prep time. If you’re self-employed or you want to track your finances, Mint, Quicken, and Simplifi are your best options. 

You can’t import your income and expenses directly into tax preparation software from those applications (though you may be able to import forms like 1099s and W-2s, depending on which solution you choose). Still, tracking your financial data electronically throughout the year will make tax preparation easier, faster, and more accurate.

3. Use the Right Tax Preparation Application

We review the best tax preparation and filing websites every year. They all follow similar procedures to collect your tax-related income and expenses, but they vary tremendously in price, the forms and schedules supported, and the overall user experience. Before you choose one, consider the answers to these questions:

  • How much can you afford? The prices for these applications range from free to well over $100. Our article on e-filing your taxes for free can help you determine if you are eligible to use select tax sites at no cost. Keep in mind that you’re never asked to pay for your tax preparation until you’ve completed it and are ready to file. In other words, if you start on one site and decide to try a different one, you’re not out any money.
  • Will you need a lot of assistance? The guidance these websites provide comes in the form of questions and answers, short context-sensitive explanations of the current topic, searchable databases of tax articles, and a combination of chat, email, and phone help (more on this later). You’re rarely sent to actual IRS instructions. 99 percent of the time, you’ll be reading help content that’s been rewritten to be understood by taxpayers who aren’t tax professionals.
  • How important is the user experience to you? As we said earlier, the user interfaces and navigation systems that these sites employ are very different. Generally speaking, the higher the price tag, the friendlier and more aesthetically pleasing the application will be.
  • Will you require a lot of supporting forms and schedules? If you have a complex financial life, you’re going to have to make sure that all of your tax situations will be covered. Some companies offer multiple versions that get increasingly expensive as they take on more topics. Others offer one version that’s free and which covers every common tax scenario (and some uncommon ones). Overall, though, these don’t provide the same level of help that the paid versions do.   

4. Follow the Prescribed Order

When you prepare your taxes on paper, there is no order. You’re constantly flipping back and forth among myriad forms and schedules, staring at official IRS and state forms.

Tax prep websites are basically lengthy wizards. They ask you questions, and you provide the answers, most often by selecting options from lists, responding to questions in the affirmative or negative, or entering data in blank fields. Then, they transfer that information to the official documents to be filed.

You advance to the next page and go back to the previous page by clicking links. There are usually other navigation tools that allow you to jump to a screen out of sequence, but this isn’t advisable unless you’ve been through the whole site once. In fact, some won’t let you move to the next page until you’ve finished the one you’re on. Many that do allow you to go out of sequence bookmark fields to remind you that you need to go back.

As you go along, you’ll probably notice that the sites follow the general flow of the 1040. They all vary a bit in the order questions are asked, but they generally follow the same path: income first, followed by deductions and credits, and then additional taxes. Before they help you file your return, these sites check for errors and omissions and give you a chance to fix any that pop up. 

If you jump out of sequence too much, this final review process may not flag data you forgot to enter because you just skipped over a tax topic you should have addressed. This is why you should follow the order these sites suggest. It’s too easy to miss things if you don’t, and you may find yourself getting so tangled up that you have to start over.

5. Read Everything on the Screen Before Doing Anything

Tax preparation websites often display messages on Q&A screens that further explain the content needed there or provide critical information about a tax topic. Be sure to read these before you answer the question(s) and click through to the next screen. 

6. Don’t Guess, Use Help Resources

There are many questions and statements on tax prep websites that are simple and self-explanatory. You won’t have any trouble responding to these. But once you start getting more complex queries, take advantage of all the available guidance. For example, these sites often hyperlink words and phrases. When you click on one, a window or pane will open that provides a deeper explanation.

Every tax site contains a database of articles that covers just about any tax topic. You can simply search for a word or phrase to find these resources. In the vast majority of cases, you won’t be directed to verbatim IRS instructions, but rather content that’s been rewritten in simpler language. Tax preparation websites have gotten very good at this, though, of course, some are better than others.

If the onsite help doesn’t answer a question you have, you can at least send an email to the company. Most tax sites offer a combination of chat, email, and phone support. Some even offer unlimited video chat with screen sharing and a review of your return. 

Technical help is always free. You can ask questions about site operations themselves at no charge. If you want professional help from an expert on an element of tax law, you’ll need a higher-tier account. Some tax websites don’t offer this as an option at all, so be sure you understand the support policies of any application that you choose upfront.

7. Know When You Need Professional Assistance

How do you know when it’s time to throw in the towel and let a professional prepare your return? That’s difficult to answer. You don’t have to have a terribly complicated return to want an expert to step in, though the more complexity, the more likely it is. You may simply not have enough confidence in your abilities to report your income and expenses accurately to the IRS and state agencies. Or you don’t want to risk an audit or penalties.

If that’s the case, some companies that offer do-it-yourself tax preparation have another option. You can upload all of your tax documents to them. A CPA or other qualified tax expert will take over your return and ask any follow-up questions. You can then review your return, and your tax pro will sign and file it.

Tax Software Makes E-filing Easier

Tens of millions of taxpayers in the U.S. take the DIY tax route every year. These applications have been around as desktop software or websites since the 1980s; you can now easily file your taxes on your phone, too. They employ security measures similar to those used by banks and other financial institutions, and their calculations are guaranteed to be correct—or their makers will pay any penalties. 

Tax preparation websites have taken a lot of the fear and frustration out of annual income tax filing. They’re thorough, user-friendly, and, in some cases, even a pleasure to use. You’ll get the most out of your tax prep experience if you do some planning (preferably year-round) and pay close attention to the information as it’s presented. If you do plan on e-filing at the last minute, all of these advantages make tax software well worth the cost.