Income Tax Preparation Software

Most adults have at some point in their life either prepared their own income tax return, or contemplated doing so. Income tax software programs have become increasingly easy to use while at the same time becoming more sophisticated. Accuracy has improved tremendously from what it used to be, due in part to simplified user instructions. There are two methods of entering the data:

  • In the interview method, the program asks questions, the user enters the answers and the program completes the form.
  • In the form method, the user enters their information directly onto the form or a field or worksheet attached to the form.

Both methods work equally well; the interview method is probably easiest for those new to tax preparation. For the individual contemplating their own income tax preparation, the following five are popular options.

H&R Block At Home
H&R Block at home, which was formerly TaxCut, offers a variety of tax preparation software choices, from their very basic program to their premium & business program, which is for small business owners and includes corporate and partnership returns, as well as non-profits, estates and trusts. A free, downloadable one-state tax preparation module is included in all the Block programs, but e-filing the state return costs additional except for the premium & business program.


H&R Block At Home Online
H&R Block also offers a best-of-both program that enables the individual to prepare their tax return online at the Block website, then send it to a local office for one of their tax professionals to review; one free session of tax advice is included. In addition, this program is available with their worry-free audit support, which guarantees that in the event of an audit, they will provide an enrolled agent to represent the taxpayer.

Turbo Tax
TurboTax is another popular income tax preparation software program with four levels of tax preparation, and a five-star rating, slightly higher than the H&R Block program. The basic TurboTax program is free for federal preparation and filing, although there is a charge for e-filing the state return. For those with simple returns, this is a good option and includes common forms such as Making Work Pay, Child & Dependent Care Expenses and Education Credits.

TurboTax’s three upgrades include free federal e-file but charge additional for state e-filing. The upgrades to TurboTax cover standard deductions for those who itemize and forms for business owners, those with rental properties, stocks, bonds and mutual funds, etc. All TurboTax tax preparation programs start for free, with payment due at completion of the return.

TaxAct income tax preparation software has an average four-star rating and their four levels are the lowest priced programs available. The free edition has free e-filing for the federal return; both federal and state start for fee in the deluxe edition, with payment being made when the return is filed. The small business edition has state modules integrated into the program and includes free e-file for both federal and state returns. TaxAct conveniently has a bundling option that allows a customized combination of their upgraded software programs.

For taxpayers with a 2010 adjusted gross income (AGI) of $58,000 or less, the Internal Revenue Service offers free tax preparation software at their website. The program is courtesy of the Free File Alliance, which is a collaboration of industry leaders in tax preparation software. Users select the free file option, then select from a list of companies that fit their needs, or there is an option to help the taxpayer locate an appropriate company.

For the taxpayer who wants to prepare their own income taxes, there are a multitude of available options that will simplify what is without doubt a daunting and arduous task. However, it can be done and for less money than a tax professional would charge.