Tax

My Favorite Tax Filing Software in 2021

My Favorite Tax Filing Software in 2021

Each year as taxes role around it becomes a stressful time for many. Even with a tax accountant, you have to compile all of the supporting documents they need and provide it to them. Additionally, when they are done with your taxes, it’s important to take the time to check them before submission.

For the past few years it has been easier for me to do my taxes on my own because I had a simple filing (in the future it won’t be like this). Doing it myself has taught me a lot, not just about taxes but also about tax filing software applications. And, since I’m a numbers girl, I look directly into costs and fees before finally clicking the “file” button.

I filed my taxes this year using freetaxusa.com, a tool that I strongly recommend over other tax filing software (Note: I am NOT getting paid to share my opinion on this). I did my research in prior years and thought that TaxAct was the way to go and I actually used them for a while. Then about 2 years ago they dramatically increased their prices and it didn’t look like they improved their software or customer service to go along with it (a general rule is that businesses should have some reason or additional benefit to customers in exchange for increasing prices). So I figured that I would try some other tools out and if I didn’t like them I could always go back to TaxACT.

I am so happy that I ended up shopping around because I eventually found FreetaxUSA. I couldn’t really find any reviews online on Freetaxusa but I tried it out anyway. I found the software to be more helpful than TaxACT and on top of it SO MUCH CHEAPER. The software easily guides you through each part of your tax filing with simple questions. I was surprised as some of the questions that popped up helped me get a tax credit that I was not expecting!

I kept looking for “the catch” like how are they going to try and get more money out of me for something I don’t need. They do offer premium assistance that is not required to file your taxes which I really appreciated. Other tax software providers require that you purchase premium services in order to itemize expenses or file certain schedules. So I ended up paying a total amount of $15 to file BOTH my federal and state taxes.

Free Tax USA was easy, SUPER AFFORDABLE, and absolutely doable if you have a simple tax filing. So far I consider a simple tax filing to be for someone filing as a single adult, with or without itemized expenses and / or a schedule C. I definitely still recommend having an experienced tax professional that you trust file your taxes. However, if you have the time and just want to see what your taxes might look like if you do it yourself, you may just go through the process and see if your results match your accountants. You can always stop short of filing your taxes with Free Tax USA and have your tax accountant file them instead. By filing your taxes yourself you may find you have more understanding of the filing process and can contribute with your tax accountant more effectively.

As a special gift, I have uploaded to my FREE resource library the business expense tracking worksheet I used to file my taxes. I have also included a training video for how to use the worksheet. Check it out if you have business expenses that you want to include in your schedule C tax filing and let me know if you have any questions!

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Don’t make business decisions based on how you THINK they may impact taxes

Don’t make business decisions based on how you THINK they may impact taxes

During one of my roles at a large multinational corporation, my business partners asked me to look into the tax benefits of donating material. You see, the team had already bought the material (so it was already expensed, aka “written-off” for tax purposes) but they did not need to use it anymore. They wanted to know if there was any reason for them to donate the material as opposed to just throwing it away. Throwing the material away would be easier so they were looking for an incentive to donate the material.

Since I am a business financial planner, I create and analyze financial budgets and forecasts compared to actual results, I reached out to a tax accountant for an answer. Similarly, in a corporate world, a tax accountant would not answer questions from business partners on planning out the financial impact of future business decisions. Those questions would be deferred to me.

When I reached out to a tax accountant I explained the situation and he answered that since the material had already been written-off (or expensed) there was no further tax benefit that could be gained. When something is expensed then the full value of the item is reduced from taxable income, simplified meaning: you don’t pay taxes on it. Then he said something which embodies so much of what we KNOW in corporate finance but that is not well-known to the average person outside of finance:

Please tell your business partners not to make any business decisions based on how they think it will impact taxes.

Why did he say that? The short of it is that taxes are complicated and a good tax accountant can do your taxes well whether you are making billions of dollars in profit or negative profit. Companies who are making BILLIONS of dollars in profit are paying a relatively small amount in taxes and are using the same tax code that you are as a small business owner. That means that the tax savings are in the tax code and are not based on the business decisions you make. You should make business decisions based on what is best for growing and improving your business not based on how you think it might impact taxes.

And it is something your tax accountant should be saying to you. Similarly to what highly paid tax accountants for large corporations say to their business partners.

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