It is August again, and that means the financial year has come to an end. It is now time to prepare your tax returns. You can choose between three options when filing your tax:
- prepare your tax returns yourself without the use of the software
- use software with good tax practice management software
- Hire a professional.
All the listed options are acceptable, and you can choose any one of them.
In this article, I am going to tell you about the second option, using tax preparation software. Tax preparation software helps its users to be tax compliant. It automatically calculates your tax payments. It can cover taxes on income and sales, and VAT. It also monitors eligible tax credits. This software is crucial in cases of indirect tax. There are two types of tax preparation software: direct tax software and indirect tax software.
So now you know what tax software is, let’s look at why you should make use of it.
- Removal of human error
This software has clearly defined slabs and pre-defined tax rates. Elimination of human error makes it easier for the software to allocate revenue and tax to the appropriate place. It also makes it easier for users to calculate their taxes. In 2018, Forbes magazine reported that the use of tax software has reduced human error by up to 98%.
- Tax familiarity
The use of tax compliance software will help you to be more familiar with your taxes, as the software has various warnings and information prompts to guide you when filing. The language used is straightforward, which make the whole process easy to comprehend. However, it is only as accurate as the information you supply.
- The simplicity of the tax compliance process
Tax compliance software is designed to simplify the process of tax compliance, for someone who has few sources of income as well as limited tax and few deductions. Tax software can quickly handle your tax calculations in a straightforward way.
One thing every businessperson loves is cost reduction. It’s much cheaper to use tax software than to hire a professional. There are free versions of the software too, but these will usually have more limited functionality, so make sure you understand your tax situation and choose the software that best suits your needs.
- Availability of audit support
Lots of tax compliance software has audit support capability. Some may require you to pay additional fees for this, but hiring an accountant for audit support would be considerably higher. If you need audit support, check the various software options available and pick the one that suits your needs.
- Personalized service
Most tax compliance software has a chat support option as well as phone support. You can see the reviews of each tax software service online. If you value a more personalized service, check the ones with the highest reviews.
The use of tax compliance software makes the tax process substantially faster, although this depends on how complicated your taxes are. That said, no matter how complicated your tax situation, it will still be considerably faster doing it with software. It could take you as little as half an hour to do your tax filing when you use tax software.
- Regular updates
Tax compliance software often updates itself regularly or draws your attention to daily updates. The regular updates are essential because of frequent tax law changes. Sometimes tax laws are announced late in the year, and the IRS can announce new tax codes unexpectedly. When you use tax software that updates regularly, you will always be compliant.
- Secure and store your taxes
Tax software makes it easy for you to keep records of tax payments. Recordkeeping is vital to business. When you use tax compliance software to file your taxes, the software stores your tax information on your computer. You can also store your data on their servers to prevent hacking, if the software you choose offers this facility.
- Help you file your tax from your computer
When you make use of software to file your taxes, it will save you a trip to the post office. Everything is done from the comfort of your office or home, from preparation to the filing of your tax returns.
- No more tax code worries
If you have ever done your tax filing by yourself, you will understand how frustrating it can be to try and remember your current tax code. With the use of software, you don’t ever have to worry about remembering tax codes. This is my personal favorite reason for making use of tax software.
With the use of software, you can file your taxes from anywhere. Flexibility is one of the features I love about tax software, making it an excellent choice for people who are always on the road.
There you have it. From experience, the debate is mostly between using an accountant and making use of tax software. I have realized that using software is slightly better than hiring an accountant, for all the reasons above. The Investopedia here will give you important tips about hiring an accountant for taxes. One thing you need to understand is that accountants also make use of software. The only difference is that they use a more complicated program.
I’ve only given the main advantages to using tax software, there are many more. Take time to research the best one for your needs.