4 Tips for Efficaciously Using Tax Prep Software: Your Personal Virtual Accountant

Can tax preparation software help you find deductions, pay less tax, and prevent unnecessary IRS trouble as well as a live individual in front of you?

For most taxpayers, today’s tax preparation software can handle all of the above tasks admirably. There are a few advantages to using tax preparation software.

After all, it is infinitely patient, meticulously guides you every step of the way, and never succumbs to tax season burnout. It doesn’t even complain if you don’t start until the last week before the deadline. To get the most out of your tax preparation software, however, you must use it correctly. If you take shortcuts, for example, you may miss out on the benefits of going through the federal and state Q&A sections.

Here’s how to confidently use tax preparation software: 

1. Prepare yourself before you begin

• By January, you should have a file set up for all of the year-end tax forms that begin to arrive in your mailbox.
• Sort them by type of income or expense when you’re ready to file your tax return.
• Put all of your W-2 forms, as well as your dividend and interest statements, in one place.
• If possible, go through each section of the program only once.
• Update your file and print relevant reports if you use personal finance software to keep track of your finances.
• It’s critical to keep track of how you arrived at the figures you enter into the tax software.
• Make a list or a worksheet with notes about how you projected amounts, valued charitable contributions, and anything else you might need to remember later.
• You should also keep track of mortgage points that have been recouped and anything else that you will need to refer to in the future.
• Before you begin downloading the program, make sure you have the most recent updates.

2. Go through the Q&A interviews in the order listed 

• It is possible to go straight to the tax forms and begin filling them out.
• However, unless you are a tax expert, resist the urge.
• By skipping the entire Q&A section or hopping around from one section to another, you’re defeating much of the purpose of tax preparation software.
• Entering information into tax preparation software without going through the Q&As from beginning to end is analogous to going to a tax professional and bumping off your tax numbers without allowing the tax professional to speak to you or ask you any questions.
• Tax preparation software or a tax professional will almost certainly ask you a few irrelevant questions.
• Don’t give up and start skipping around.
• Tax ACT is designed to ask you as few questions as possible while still ensuring that your taxes are completed correctly and to your advantage.

3. Fill out the form one section at a time 

• Try to deal with each piece of tax-related paper only once. After you enter an item, a checkmark or other mark indicates that you are finished with that item.
• As you go, you can use your worksheet to jot down any questions you have.
• It’s not uncommon to discover that you only require one more receipt or the interest income from another account.
• Don’t let the fact that you don’t have everything stop you from getting things done. Don’t give up and start skipping around.
• If you can’t find a number for a large number, such as your property taxes, you might want to enter an estimate.
• Most of us are eager to see the total amount of income tax owed or refunded, and entering estimated amounts can help you do so.
• Mark an entry box as an estimate by right-clicking it. TaxACT will remind you to double-check the number before filing.

4. Examine before you file

• You’ve completed the federal and state Q&A sections, but you’re not finished.
• Check the main tab for any missing or incorrect information.
• Tax ACT will not allow you to file until you have corrected some errors and omissions.
• Other items may not prevent you from filing, but you should review them to ensure you are receiving all of the breaks to which you are entitled.
• You should also look over your tax return.
• It’s natural to believe that if you’ve entered all of your numbers, your tax return should be perfect.
• You are, however, responsible for reading your return and ensuring that it is correct.
• For example, if you enter car mileage for your small business but leave out just one check box in the questions, the program may determine that you are ineligible for the deduction.
• By comparing the items you expect to see on your return to the income and deductions on the actual form, you can make sure everything was entered correctly.

Conclusion: 

Although tax preparation software is not perfect, it can handle the majority of taxpayers’ needs. It is important to use the software correctly in order to get the most out of it. For those that are diligent and patient, tax preparation software can be a huge help in completing their taxes on time and without stress.