3 of the Most Common Questions Tax Experts Get About Tax Software
Written by
Josephine Nesbit
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Jenna Klaverweiden
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Tax software makes filing a return simple. While platforms are designed to be straightforward and user-friendly, questions often surface that can cause some confusion.
According to two tax experts, some of the most confusing questions have to do with safety, whether the software will catch all available credits and deductions, and whether or not it’s a good option for businesses.
Here are some common questions about tax software.
Is It Safe?
“The most common question I hear from people about tax software is whether it is safe to trust it with their personal and financial information,” explained Geoff Knight, founder and CEO of File Tax.
Many tax software companies use encryption, multifactor authorization and secure servers to protect users’ data. It can also be safer than filing a paper return.
Paper filers don’t have to worry about malware or data breaches, but paper also goes through several hands, including the post office, postal transportation carriers and centers at the IRS, Forbes reported.
Will It Catch Everything?
“The second is whether the software will catch everything or whether they will miss out on deductions they did not know to look for,” Knight said. “Both questions come from the same place, which is a lack of confidence 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 can miss them if you enter information incorrectly or leave out key details.
Is It a Good Option for Businesses?
Business taxes are often more complex and may require the expertise of a tax professional, particularly when dealing with deductions, depreciation, payroll taxes or estimated quarterly payments.
“If someone does taxes on TurboTax, they just do it (wrong, usually especially when it comes to business),” Tatiana Tsoir, CEO and CPA at Linza Advisors Inc., wrote in an email.
It may work for smaller businesses at first, but it typically doesn’t last. “Usually, when their affairs get a bit more complex, they switch over fully,” Tsoir explained.
How To Choose Tax Software
“My recommendation is always to look for software that is officially approved by the Internal Revenue Service, because that approval means the platform has met 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 state that they are an IRS authorized e-filed provider.
“Beyond that, good tax software should ask you questions rather than assuming you already know what deductions apply to you. If your software is not doing that, it is not working hard enough for you,” Knight said.
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