Many aspects of self-employment are convenient, including the ability to work from home or run a business as you see fit. However, one inconvenient aspect is that self-employment can make filing taxes difficult. As a self-employed worker, you must pay income tax and self-employment (SE) tax. The latter allows you to pay into the Medicare and Social Security systems in preparation for later retirement.
Filing taxes as a self-employed worker is also complicated due to the paperwork you must file. For example, Schedule C (Form 1040) is required if your net earnings are above a certain amount. Form 1040 is also required when you qualify for certain tax credits. To successfully file your taxes with such confusing regulations, it is necessary to select online tax software designed to assist with the concerns relating to self-employment. However, tax software companies change the features of their software programs annually, so it can be difficult to keep track of which program is best in a specific year. The following is a list of the best four tax software programs for self-employed workers, as of 2018.
Intuit TurboTax Self-Employed
TurboTax has a reputation for greatness in the world of tax software. Intuit has produced many incarnations of TurboTax over the years. One of the newest, released in 2017, is called TurboTax Self-Employed. Although costly compared to some other tax software, it has several noteworthy functions not found in other products. For example, in its second year, the software has expanded from scanning for 350 tax deductions for self-employed workers to 450. Other key features are as follows:
- TurboTax Expense Finder that locates deductible business expenses by scanning credit card and bank transactions.
- Real-time expense tracking.
- Industry-specific deduction information.
- Audit assessment.
- W-2 form importation functionality to reduce the need to manually type in data.
TurboTax is also well known for its user-friendly interfaces. When filing taxes, a taxpayer can easily follow the prompts provided by the software. TurboTax Self-Employed also features access to a function called SmartLook. SmartLook allows the taxpayer to video conference with a tax expert when necessary. The taxpayer can also schedule SmartLook conferences ahead of time, if desired.
H&R Block Premium
H&R Block Premium is less expensive but less user-friendly than TurboTax. However, it offers several features a self-employed taxpayer can use to successfully file taxes. If the taxpayer operates a nonprofit business, the fact that H&R Block Premium includes Form 990 is particularly useful. Form 990 is used for nonprofit filing and is not included in the software offered by many competing tax software companies. Other useful features of H&R Block Premium for a self-employed taxpayer include:
- SmartPhone app tax filing option.
- Data import function to allow the software to use previous annual data to partially complete a current tax form.
- Maximized self-employment deductions with advanced Schedule C guidance.
- Audit risk assessment.
- Accuracy review.
- Guide for filing taxes from contract or freelance work, as well as self-owned business taxes.
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H&R Block provides some of the best customer support among tax software programs. Unlimited free chat allows the taxpayer to discuss any filing concerns with an expert. If the taxpayer purchases H&R Block Premium, he or she is also entitled to free in-person consultations. H&R block maintains multiple branch offices throughout the United States.
TaxSlayer offers an economical alternative to TurboTax and H&R Block. It offers two methods for filling out tax forms. Using one option, the taxpayer may input information with no assistance. The other option is to use the wizard provided within the program. Use of the wizard allows the taxpayer to complete confusing portions of the tax forms with assistance from the software. The taxpayer may turn the wizard off or on at any time. Other TaxSlayer functions to assist with self-employed tax filing include:
- Deduction guide.
- Maximum refund guarantee that provides a refund of the amount paid for the software, if errors are discovered after the fact.
- Pre-filing data check to ensure no errors are made on the tax form and prevent delays in IRS processing.
- Audit assistance.
- The ability to compare the tax return from the previous year to the current return, if both are filed through TaxSlayer.
When investigated by Consumer Reports and compared to several other tax software programs, TaxSlayer received high praise for its customer support. The TaxSlayer website includes a Q&A section with answers to common queries. The software also includes a built-in chat function, allowing the taxpayer to ask a tax expert for assistance, as needed.
One minor but common complaint regarding TaxSlayer is TaxSlayer Premium is nearly identical to TaxSlayer Self-Employed edition. The only difference is the self-employed edition offers free state tax filing. Therefore, it is the most economical choice. However, the total savings is often negligible.
TaxAct offers a premium edition and a self-employed edition with similar features. Both are useful for a self-employed taxpayer. However, TaxAct Premium offers audit protection services lacking in the self-employed package. TaxAct is comparable to other programs, such as TurboTax, but it has lower filing costs than most. It also offers several helpful features, including:
- Added security features, including two-factor authentication.
- Interview-style questions to guide the taxpayer through the filing process.
- Filing advice in real time as the taxpayer completes the online forms.
- Bookmarks that allow the taxpayer to revisit sections of the form easily, as needed.
- A DocVault feature that allows the taxpayer to use a smartphone to upload images of receipts and other relevant documents year-round for easier automated filing and household clutter reduction.
- A color-coded alert system to notify the taxpayer of major, moderate and minor problems with tax forms before filing is completed.
The TaxAct software is more thorough than software offered by many other companies. However, one downside is that its thoroughness means a taxpayer must take more time filling out the required online forms. Additionally, the perks of the TaxAct filing system do not extend to customer support. For example, the software does not offer brick-and-mortar assistance locations, such as those offered by H&R block. The online support also tends to be slower than support services offered by other tax software companies.
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