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Tax Software

Preparing to File Tax Returns Not Always Difficult

Tax software use offers many advantages over efforts by individual trying to manually file the annual income tax returns.

The helpful software guides you through the process, will note any changes in federal laws regarding deductions, exemptions and donations. Therefore, it is easier to filke a return today than it was in prior years.

The effort to prepare a tax return is not one of the easiest things to do. There are complications and subtle changes in the law. Thus something you have been doing for years has now changed, and it may not be noticed if filing a paper return.

Just like any product, there are good vendors and not-so-good-vendors. Thus, if this is the first year, you are using tax preparation software, read the reviews, talk to friends and determine what is best for you.

Some of the advantages of using tax preparation software include:

  • After the first year where all the personal information has to be formed, the tax software will do that automatically in following years if the same computer is being used or if the data has been transferred to a new computer.
  • A new copy of the software has to be purchased each year, because the newer versions will have the up-to-date forms and be programmed for any changes in tax law or regulations.
  • The software helps to figure the value of various deductions such as medical expenses, sales and property taxes, donations and other details.
  • Most software companies offer either telephone support or chart support so that you can get advice from the company if there are any questions.

There are constant changes in the tax laws. Sometimes there are major changes and other times they are more subtle. Furthermore, deductions, once allowed in the past, are no longer available.

At one time, the interest paid on a leased vehicle was deductible. That deduction was eliminated. In another case, parents who adopt children get a special tax break, that was not offered as a deduction in the 1980s. The child could be claimed as a dependent, but there were no deductions for fees that had to be expended on an adoption.

The enactment of the Affordable Care Act (Obamacare) has also put some new wrinkles in the tax returns. Frequently, it turns out that the subsidies offered by the federal government for purchasing an "Obamacare" policy were excessive. This meant that some of the money had to be returned when the annual tax return was filed.

To make the task of preparing your tax return easier, keep the following in mind:

Decide which computer tax software you are going to use, if you are going to hire a professional, such as a CPA, or have the returned filled out by an agent for the companies that sell the software. The effort needed to file a return is reduced.

Get all your paperwork together in a single folder. This includes the W-2 forms, W-9 forms, notices from the IRS, receipts for donations, taxes remitted during the past year to the state. Prepare a list of items you donated to Good Will, Salvation Army, etc. Follow the IRS and tax preparation guidelines for determining the value of these donations.

Usually, if you paid $100 for something, the donated value will be lower. Be aware your tax software will check your form for accuracy and might question some items. Some variables may raise some red flags. Your data may be correct. Just be sure it is. The warnings are an aid and should not be dreaded.

Taxes