In a nutshell, tax preparation software programs simply walk you through the steps of preparing your federal and state income tax returns. These programs ask you a long list of questions and then, based on your answers, fill out the appropriate tax forms.
Tax preparation software programs come in two varieties: a stand-alone program that runs on your desktop or laptop computer and a web program that you access using your web browser and Internet connection. While, theoretically, the web-variant of tax preparation software should work just fine, we recommend that you go with stand- alone software that is installed on your computer. If you use web tax-preparation soft- ware, your tax return gets stored on the web server—or at least some of your tax data
does. Because there have been problems with data security and privacy on web serv- ers, you are better off using a stand-alone program.
Although tax preparation software works very well for most people, the software doesn’t meet everyone’s tax preparation requirements. If you have a complicated return with numerous special situations involving investments or a small business, you probably won’t be able to easily prepare your return using tax preparation software. And, in fact, you may find it impossible to prepare your return even if you want to. Tax prepara- tion software can’t replace the help that an expert tax advisor supplies.
To use tax preparation software, simply type information into fields, answer questions by clicking buttons, and make selections by checking boxes. The program performs any calculations.
NOTE One other noteworthy feature of tax preparation software is that you can often file your return electronically if you use this software. Electronic filing saves you time, and supposedly reduces the risk that your return will be audited and speeds your refund. (Tax preparation software reduces the risk that your return will be audited because this software eliminates simple mathematical errors on the return, and mathematical errors often result in audits.
