Finally, 2021 has arrived, and while you make your new year’s resolutions, it is also time to file for your taxes.
As the pandemic disrupted the workforce and people’s livelihood, the process of filing taxes has also changed. Let us look at various tax software available for taxpayers.
This article will guide you on how to choose the perfect software for you.
However, paying taxes can be confusing as many people don’t understand taxes that well. Thus, tax software can help us files taxes easily with better comprehension.
1. What Is Tax Software?
Tax software helps taxpayers in preparing and filing income tax returns. Visiting no tax offices, you can get information about your income tax returns at the comfort of your home.
The primary purpose of this software is to automate your process and perform the procedure manually. You can be up-to-date with tax rules and regulations, saving your precious time and money.
If you aren’t familiar with taxes or find it hard to calculate, tax software makes it manageable and simple for you. All you have to do is enter your tax information on relevant tax forms. The software will then calculate the tax you need to pay and the refund you can expect.
Tax software may eliminate the idea of hiring a professional to guide you. Softwares like these are aimed at non – tax professionals, which they can find easy to use.
2. Why Use Tax Software?
Why take the time to fill different forms and pound on the calculator to get the correct tax amount when you can file tax returns online? These are some reasons you should use tax software:
- User – Friendly Tax software guides you step by step through the filing procedure and avoids any mistake that can normally take place. They are designed in a way that makes it simple and easier for an average taxpayer to understand.
- Affordability – Costing $50 or less, tax software has many features to choose from and files your federal tax for free. A qualified tax professional or CPA will cost you double the amount you pay for tax software. Providing in-depth service, tax software can save a lot of your money.
- Saves time – While going to a tax office may take more than an hour, combining with long queues, tax software saves a lot of your time. If you have the papers ready, tax software can quickly file your taxes. Most of them require less than half an hour to file your tax return. In contrast, a professional accountant may take several days to weeks to process your documents.
Most tax experts agree that tax software is efficient and safe to use for an average taxpayer.
3. Why Go For Tax Filing Online
The majority of Canadians filed their taxes online in 2020. Still, wondering what other benefits you can earn while filing taxes online? Here are some advantages a taxpayer can benefit from:
- Filing taxes online results in a much faster process than a paper-filling method.
- Filling a form while applying for tax is very important. One needs to make sure there are no errors in the form, as it may cause your tax procedure to get delayed. Tax software minimizes errors that may occur on your form and ensures a smoother process.
- One of the biggest advantages of opting for tax filing online is to apply for it anywhere and anytime. You can use any gadget, including mobile phone, PC, or Tab, to file your returns online. The software is accessible for anyone, 24/7.
- Privacy is essential, and tax software ensures the confidentiality of your data.
- Have you ever misplaced your old documents, which led to a delay in filing taxes? Tax software can avoid this from happening as it secures your old and the uploaded database.
- Tax software gives reassurance as it promptly provides an E- receipt once you have submitted your returns.
- While paying your tax on time by tax software, you can avoid late payment penalties. The software ensures you complete your procedure before the due date.
4. Things To Look For In Tax Software?
Tax software is available for everyone, but selecting the right one for you can cause indecisiveness, as plentiful options are available. Keep these tips in mind while looking for tax software:
- Tax software and their system differ from one another. Many include the Free, Deluxe, and Premium versions. These do not share the same features, as many versions may have additional perks. If you are a basic taxpayer, you can always opt for the Basic Version.
- However, if you find yourself in doubt, you can buy the premium, ensuring that you receive all the features you will need.
- Some tax software includes the state return price, while others charge separately for it.
- Your tax software must offer a ‘tax deduction finder’ feature that digs up deductions you may not realize were available.
- Electronic filing fees may apply to certain software, but they are often charged separately.
- If you opt for the filing fees, make sure you research its price. Otherwise, you can always print out and mail your tax returns.
- Always ensure a helpline or chat box is available in the tax software to assist you with any problems you face.
- A good tax software provides an email id, toll-free number, or an online forum. Ensure any additional fees you might have to pay while asking a tax professional for help.
- Make sure the tax software you choose must be NETFILE Approved. NETFILE is a service that directly sends your tax returns to the Canada Revenue Agency (CRA) safely. Once the CRA receives it, you will be notified.
5. Tax Day: The Top Things To Be Mindful Of
It is finally the day you file your taxes. If you feel nervous and all over the place, just keep these few things in mind:
1. The Tax Software Interface and Process
Every tax software has a different Interface and process, depending on different taxpayers. Software that may suit a simple taxpayer may not be the correct one for a business owner.
Thus, one must thoroughly read the description of every software program. It must provide the maximum benefits to the user depending on the price and features.
There are two types of interface found in most tax software:
- Form-Based – This type of interface imitates the layout of several tax forms and documents. Like how you fill the form, the software allows you to fill information in the correct boxes.
- Interview-Based – Interview-based tax software is commonly found and is the easiest to use. It is in the question-answer format to simplify the tax filing process.
2. Free Tax Services
Tax software offers certain services free, while others can charge you with an unexpected fee. For example – a specific software may provide free services only to those whose income falls under certain criteria.
Others may offer only one year of free filing, and you may have to switch to another software. If you have a complicated tax situation, you may have to use advanced tax software features.
Many of these advanced features are not free, and hence, depending on the software, you may have to switch to another.
3. Protecting Your Privacy
The terms and conditions of every software can be tedious to read. Yet, always be mindful of the terms provided by a certain tax software as cybercrime is still prevalent.
Your passwords must be strong. You must always update your software and check for encryption.
4. How Online Tax Software Works
- Once you install the tax software, you need to accept the software’s terms and conditions.
- After that, either a form or interview-based interface will be presented to you.
- When you are satisfied with all the answers, it will direct you to fill in your contact information.
- When everything has been filled in, the software will calculate and let you know any errors.
- The software transfers your tax data to the state you must file your returns.
- After checking your entire return, you can pay service fees if mandatory.
6. Top Tax Software Choices For You
Here are some of the most well-known tax software you can choose from :
1. Turbo Tax By Intuit
- Key Features
- In most circumstances, Turbo Tax helps prepare and file tax returns for you.
- It has a free version with various options available.
- Turbo Tax offers customizable Reporting, tracks your expense, and provides statistics.
- It also provides on-screen advice directly from credentials CPAs.
- Provides self-help tools and much more.
- It guides you step by step through the process of your tax return.
- Allows you to talk to tax professionals about your tax return and let it review it.
- The navigation of the Tubo Tax is simple and easy to follow.
- Turbo Tax’s mobile app is available, which can easily sync to your desktop.
- Products on Turbo Tax are expensive than most of the competing software.
- If you use your refund to pay, it will charge an extra fee.
- Your ultimate price to pay won’t be revealed until Turbo Tax completes the entire process. This usually depends on what features you used in the software.
- Ideal For
- Since the software is user-friendly, Turbo Tax is ideal for an average taxpayer.
- It is good for those who have a small business or a startup.
- If you have a somewhat complicated tax issue, Turbo Tax is ideal for you.
- If you are looking for more deductions, Turbo Tax can help you with that.
2. H&R Block
- Key Features
- H&R Block has an Online Assist Program where you can talk to tax professionals such as CPAs and enrolled agents almost anywhere.
- It offers a refund bonus to customers who own an Amazon Gift Card. Instead of loading the refunds to direct deposits and other payment methods, you can load the desired amount onto the Amazon card.
- H&R Block offers four editions of their online software: Free, Deluxe, Premium, and Self – Employed.
- Supports most of the tax forms and guarantees maximum refund.
- It promises to provide accurate calculations only.
- H&R Block is easy to use and helps you find the right service through a series of simple questions.
- It commits to transparency by giving straightforward pricing information, unlike other software.
- H&R Block is affordable and versatile, offering various options for filing taxes.
- It provides multiple refund options such as depositing it in your bank amount or Amazon Gift Card.
- Has handy features such as a donation calculator and mobile app.
- Although H&R offers an advanced tax refund, it comes with an annual fee and an interest rate.
- The free and low-priced plans in the software cannot handle complicated tax issues.
- If you want additional services, you will have to pay extra fees to access them.
- Ideal For
- Students looking for a free filing option.
- Those who haven’t filed their taxes before and wish to have clear explanations of the tax process.
3. Jackson Hewitt Online
- Key Features
- Promises a guarantee on a maximum refund.
- The software’s level of accuracy and assistance is top-notch.
- Offers an easy tax filing process.
- It has a mobile app that everyone can access anywhere and anytime.
- Jackson Hewitt has reasonable pricing.
- It provides comprehensive interview options.
- It has good error-checking.
- People can navigate the online interface easily.
- For different tax circumstances, the pricing for different options may be higher.
- Jackson Hewitt does not offer any audit support.
- It offers less customer support help, as you may have to visit their office instead of chatting or talking to a professional online.
- It cannot solve very complicated tax situations.
- Ideal For
- Jackson Hewitt is best for in-person tax preparation.
- If a person wants to file multiple state returns, this software lets you do it with ease.
- Self-employed filers who are willing to pay for the expensive options.
- Those desiring to file taxes in-person as there are many physical offices available for Jackson Hewitt.
- Key Features
- The interface of TaxSlayer is easy to use.
- Provides handy features such as a donation calculator and platform mobility.
- Offers various options for support options like general guidance, tech support, and one-on-one tax help.
- Provides certain business features.
- Let’s you file simple tax returns for free.
- Affordable add-on fee for state returns.
- One of the most budget-friendly DIY software.
- Provides military discount while filing federal taxes.
- Live chat for TaxSlayer is not available for all versions.
- Audit Support is fundamental and costs extra for Free, Classic, and Premium users.
- It does not provide a price of what you might end up paying in the end.
- Getting help from tax professionals is very limited.
- Ideal For
- Someone who is confident about tax filing and does not need much help in the process
- Looking for the tax returns to get done at a low price.
5. Credit Karma Tax
- Key Features
- A completely free tax filing software where users can file state and federal taxes.
- Guides users through a questionnaire.
- Supports most forms and schedules.
- Offers accurate calculations for users.
- Credit Karma Tax is fast and free.
- Easy to use interface and offers quick navigation.
- It has a mobile version making the filing process easier.
- Your data is encrypted in the Credit Karma Tax.
- I cannot notify you of any errors.
- Does not provide expert tax help.
- You can’t import certain data, such as your investment data.
- Ideal For
- Users who like a simple interface and wish to save money on tax preparation.
- Those looking for basic tax forms.
- Looking to file taxes with no expert help or advice.
- Key Features
- Provides multiple refund options.
- Has access to PDF import.
- You can make your own personalized form through this software.
- Has a tax glossary with 300 helpful tax terms.
- Affordable for small business owners.
- Provides several low-cost products.
- Has a screen sharing option.
- Offers multiple refund options.
- Does not provide Audit support.
- Customer Service isn’t as accessible as other competitors.
- State Returns cost more in TaxAct once you reach a certain level.
- Ideal For
- Those looking for a good value in a Tax Software.
- A confident user who requires little guidance about preparing their taxes.
7. How Do I Find The Easiest Tax Software To Use?
1. If You Are Overwhelmed:
If you find filing taxis overwhelming and stressful, the best tax software for you would be TurboTax and H&R Block. With their extensive and easy navigation, all you have to do is upload tax forms and answer a few questions. They efficiently perform the tax process and offer expert guidance if you need it.
2. If Saving Money Is More Important:
Credit Karma Tax is completely free software for federal and state returns if you want to save your money. The H&R’s Block free version offers several features that can help you save money.
The higher tier packages of TaxAct, TaxSlayer, and Jackson Hewitt offer tax software for half the price. They provide a variety of useful features that can easily speed up your tax process and save money.
3. If You Care About A Big Tax Refund:
If you want to receive a big tax refund, file tax returns with different online software. All the tax software mentioned above allows you to start a free tax return and pay only when you are ready to submit. They let you see your tax refund amount before the payment is required.
You can cancel your filing application anytime if you aren’t satisfied with the refund amount.
8. How To Choose The Best Tax Software?
With so many options available for you, how can you decide which software is the right one? Many taxpayers face penalties, unpaid taxes, non-filers, errors in their calculation, stuck with an audit, and under-reported income.
Many taxpayers face multiple issues, which can result in CRA charging hefty penalties.
To counter and avoid such problems, many tax software aims to solve these issues faced by users. Let us look at how you can choose the best tax software for 2021:
1. Stage Of Life
As your stages of life change, you will have to switch or upgrade for better tax software. For example, – An average taxpayer may benefit from one software. The same may not be useful if you become a business person or an investor. You need to understand which software might benefit you while thoroughly researching it.
2. Free VS Paid
Tax software offers various versions such as Free, Deluxe, and premium. How will you know which one suits you the best? One company’s free or deluxe versions may not offer the same features as another company.
It is recommended that you go for the premium version if you want to have the best features. Although the features in this version will not be the same for every company, you will still have all the options available to file your tax.
However, if your tax situation is fundamental, you can always opt for the free version, efficiently completing the process.
3. Tax Credits
A Tax Credit is an amount that taxpayers can directly subtract from the taxes they owe to the government. There are different tax credits available for taxpayers. They save you more deductions and reduces your total tax.
Certain Tax software allows tax credits and minimizes your overall tax. The best tax software makes sure you get the deserved tax credits.
4. Not For Everyone
Not all tax software will be the correct one for you. To choose the right software, you need to look at your tax situation. If it is a basic process, any of the software can help you with that. However, if it is a complicated process, you need to upgrade to higher versions or completely switch to new tax software.
For example- Credit Karma Tax is free and lets you file your basic tax returns with no charger. But, if you are looking for in-depth guidance and professional advice, you may need to switch to the Turbo Tax or H&R Block that provides these features.
5. Easy To Use
The tax software must speak your ‘language’ and should provide a clear interface for users. You need to see which software is equipped with your preferences – form, questionnaire, or interview-based.
Many tax software is straightforward to use and navigate, yet not all have the same features.
6. Mobile App
A good tax software must have mobile options such as a mobile app that users can access easily. While various software may provide you with an app, few don’t.
If you want to make your tax filing process easier and quick, choose software with a mobile app and sync it to your desktop.
9. Finding The Right Software For You
1. Best Tax Software For Student Loan Borrowers
H&R Block is perfect for those with Student loans or Education expenses. The most expensive version of H&R is still affordable for many students in Canada.
Credit Karma Tax is also perfect for Student Loan borrowers. However, it may not be as efficient as H&R Block. Credit Karma Tax is ideal if you are looking for free state and federal filing and looking for more deductions.
2. Best Tax Software For Cryptocurrency Traders
For easy integrations with crypto wallets, TurboTax Premium is very useful. It imports your transactions and declares profits and losses. There is no other software perfect for cryptocurrency traders than TurboTax premium.
3. Best Tax Software For Stock Market Investors
While almost every software is beneficial for stock market investors, H&R Block Premium is time-saving and proves to be more efficient than other software. It allows users to upload their tax forms from brokerages and also calculates your capital gain taxes.
TurboTax Premium is also matched with H&R Block Premium but isn’t as useful as the latter.
4. Best Tax Software For Landlords
Landowners face complicated returns, and keeping track of expenses and income can be exhausting. The software that calculates depreciation easily is the H&R Block Premium.
The software makes it easy to figure out and claim appropriate deductions. The instructions are written in plain language, and the in-built calculator in the software provides everything a landlord may need for their tax process.
5. Best Tax Software For Side Hustlers
Side hustlers have a relatively smaller income than small business owners. The ideal software for side hustlers is TaxSlayer Classic, which provides access to all forms cheaply. It is perfect for those who need a basic interface and no extra features.
Credit Karma Tax and H&R Block premium are also useful for side hustlers in managing their tax returns.
6. Best Tax Software For Small Business Owners
The perfect software for small business owners is TaxSlayer self-employed. It is affordable, has excellent functionality, and provides plenty of information to users.
10. The Top Taxes FAQ
1. What is the best tax software for 2021?
According to CNBC, the overall best Tax software of 2021 is TurboTax. TurboTax is Canada’s best-selling software due to its well-rounded features.
2. When is my 2020 tax due in 2021?
The tax filing deadline for Canadian taxpayers is April 30, 2021, for the 2020 tax year. For those who are self-employed or have a self-employed partner, their deadline extends till June 15, 2021.
3. What happens if I miss my tax deadline?
If you miss your tax deadline, the CRA will charge you with a late-filing penalty.
4. If you don’t usually file a tax return, do I need to take an extra step?
If you don’t usually file a tax return, it is against the law. The CRA can charge you with late filing penalties along with the interest charges on the tax debt you owe. The longer you wait, the more the penalties and interest will increase. Since the CRA is a powerful agency, they will be notified immediately if you don’t file your tax returns.
5. How do I maximize Credits and Deductions?
If you want to maximize Credits and Deductions, you need to calculate your taxable income. Then, lower it by using as many tax deductions and credits as you can. While a credit minimizes the amount of tax you owe, deductions reduce taxable income.
6. Should I pay someone to do my taxes?
You should only pay a tax professional if you have a complicated tax situation or want someone to guide you. Here is when you should pay someone to do your taxes:
- Your income is $200,000 or above per year.
- You experienced a major life event, such as marriage or divorce.
- You start a new business.
- You have complicated investments like a partnership.
7. Filing Taxes amidst Covid Pandemic
Several tax filing and payments have been extended. You can find more information on deadlines in Appendix A. Here you can find the extensive rules laid out for Canadian residents filing taxes during the pandemic.
8. How much does it cost to have someone do your taxes?
If you are looking to itemize your deductions, it may cost you $294, including state and federal returns. If you are not looking to itemize deductions, you can expect to pay $176. Depending on the complexity, the most basic tax returns can cost $60 to $1000 in Canada.
Remember that these average costs may differ if your tax returns come under special categories and take longer than expected for the accountant to complete.
9. How do I find the best value tax software for me?
It is important to look at the accuracy and maximum benefits you can get from tax software. They should suit you and provide only the best feature according to your preferences.