Online tax services can save you significant time and money versus using a paid tax professional. Compared to filling out and mailing in your tax return, an online tax service provides you with additional support and valuable record-keeping. This middle-of-the-road filing option is ideal for many taxpayers. Is it right for your tax situation?
There are many advantages to using online tax services. It has specific benefits over both manually filing your tax return and using a paid tax professional.
Easy to use and convenient
Using an online tax service is convenient. You can file your taxes from the comfort of your own home. You don't need to lug all your tax documents over to your local tax preparer. It may take you as little as an hour of your time to complete your entire tax return.
Online tax preparation services provide sufficient guidance for most taxpayers to file. They will walk you through your return step-by-step. In-depth tax knowledge or tax preparation skills are not required.
A cost-effective alternative
The Internal Revenue Service (IRS) has partnered with a few tax preparation websites to offer a free e-file option for taxpayers with under $72,000 in adjusted gross income (AGI). Even if your income is above this threshold, online tax preparation software is almost always cheaper than having a tax professional file your taxes for you. Most online tax services offer a substantial discount to anyone with a basic return—those with the standard deduction and straight-forward income streams. You may need to pay more if you own a business or take certain deductions or credits, but these online tax services are still considerably cheaper than paid tax preparers.
Faster receipt and turnaround
Filing your taxes online is much more timely than snail-mailing your return. When you file your return online, you are able to ensure the IRS accepts and processes your return faster. This means a quicker refund if any is due to you.
Filing your taxes online is also faster than using a paid tax preparer. When you use a paid tax professional, you enter into the queue of other taxpayers waiting to have their returns filed as well. When you prepare your own return online, you are your only client. There is no waiting period and no follow-up needed to see when your tax return will be filed. You can file as soon as you have all your necessary tax forms and supporting documents.
Helpful for record keeping
Online tax preparation software typically stores your prior years' information. This saves time when you file in the following years, so long as your living circumstances have not changed considerably.
Additionally, it is important to have access to your prior years' returns in case of an IRS audit. If you're looking into a home mortgage or other loan, you may also need access to your previous years' returns to provide as part of the supporting documentation during the application process.
Although not as common as it was in the past, some taxpayers do print tax forms and handwrite their tax returns. Handwritten returns are often difficult to read. There is also a higher risk of mathematical errors and mistakes with personal information when you file manually.
Online tax preparation software will identify the tax forms and documents you need to have in your possession to begin the filing process. It asks you a series of questions about life changes and circumstances to identify opportunities for various tax credits and deductions. It also performs a final review to ensure you have not missed any important items in your income, deductions, and credits.
Additional support is typically available and offered by online tax services if you want or need it, but be prepared to pay extra. During the filing process, your online tax service may even offer audit defense in case your tax return is selected for an audit by the IRS.