The Federal income tax filing deadline is months away but if your assets are complex it is best to begin preparations as soon as the calendar turns over to the New Year. Procrastination can lead to a hefty and unexpected shortage in withholdings that you may have to scramble to resolve and account for on a short notice. Of course, Turbotax and other online solutions are there to make the process very quick, relatively painless, available from your home office, and designed to give you the optimal level of deductions for your situation. Though geared toward individuals and couples without business earnings, capital gains, or other sources of income that add complexity to the filing process, these services offer professional packages that are meant to squeeze out every last deduction available. At what do these services excel and is anything missed by opting for a digital tax professional instead of a human one?
TurboTax, TaxAct, and TaxBrain are fairly affordable. TurboTax Home & Business is tailored to the self-employed, sole-proprietors, consultants, 1099 contractors, or single-owner LLCs and priced at $99. The TurboTax Business edition is suitable for S Corps, partnerships, C Corps, and multi-owner LLCs and is priced at $149. It can be accessed as a web-application and worked upon anywhere with an internet connection. TaxAct offers 1065, 1120, and 1120S editions for $39.95. TaxBrain offers a premium edition for small businesses and the self-employed at $69.95. These prices could be a worthwhile business expense if the product is able to translate into large tax savings.
In addition to the relative low cost, as a percentage of operating expenses, the electronic tax services offer a completely guided and stepwise approach to adding up all the earnings and deductions. TurboTax in particular is quite intuitive as it makes a fairly streamlined attempt to find hidden deductions and address the user over items that may have been overlooked. During the final assessment before electronic filing, TurboTax will perform a preliminary “audit” and look not only for money-saving items that may have been lost in the process but also inconsistencies that may act as an alert to the IRS. A very large amount of effort and care has gone into making these electronic packages worthwhile digital “guides” that offer answers to the most common tax questions. As a bonus, the TurboTax professional edition offers chat-based and telephone based consultation – on a limited basis – for income tax questions that can not be answered by the software.
These electronic tax preparation packages are admittedly quite mature and in fairly simple cases offer anything that you may need. However, the world of business and the world of Federal Income Tax are rarely ever simple. For instance, let’s imagine a situation in which you had income from a full-time W-2 position but earned 1099C contractor income on the side in excess of the $400 that is required for reporting business income. In the same year you may have finalized a divorce but decided to file separately due to personal reasons. A tax preparation software package assumes a certain level of continuity in your financial situation, but in practice it can simply not account for all the complexities of a person’s financial life. In this case a flesh-and-blood professional, who is able to answer and account for any unexpected question you may have, is worth the extra premium that you may pay. In the world of tax preparation, a single missed item may actually make a substantial difference in the final outcome.
If you manage a small business, take the time to explore what our seasoned professionals may be able to offer you when the Federal Tax deadline rolls around.