Many small businesses already use some kind of accounting software to track their day-to-day cash flow so why not apply that do-it-yourself attitude toward filing your own taxes? But handling your business taxes on your own takes more than a little know-how and no small amount of courage. It also helps to have the most appropriate tax software for your small business. With that in mind, here’s a look at what three of the most popular tax prep programs have to offer this year.
The most well-known and widely used tax software for small business is Intuit’s TurboTax. Intuit is offering two different packages for the 2010 tax year. TurboTax Business, designed for corporations, partnerships, and LLCs, costs $129.95 and comes with five federal e-file credits. To file state taxes, however, you’ll need to download a separate TurboTax software component (pricing for state tax filing has yet to be posted).
Sole proprietors and single owner LLCs may be better served by TurboTax Home & Business ($99.95), which allows you to file your business and personal taxes together. As with the Business edition, five federal e-files are included. (The IRS caps the number of annual e-files from any one entity, individual or business, at five.) You can also file state taxes with Home & Business, but each one will run you an extra $19.95. Both the TurboTax Business and Home & Business models are available as downloads and on CD. Compared to the CD, the online version of Home & Business, which costs $74.95 for one federal e-file and $36.95 for each state filing, can be a better deal if you only have to file one federal and state return each.
TurboTax tends to be the priciest of the major tax prep software products, but also comes well reviewed, receiving a best-in-class 19 out of 20 rating in Tax-Compare.com’s annual comparison of tax prep software. It’s no surprise then that TurboTax has become something of an industry standard. “The reason I’m fond of [TurboTax] is so many bookkeepers and accountants are fundamentally comfortable with it,” says Richard Wooley, principal partner at the New York-based business consulting firm Bond/Wooley Inc. Speaking of industry standards, TurboTax continues to offer free coverage in case of an audit and a network of professionals to offer you help and support should you need it.
|Note: This article is Part One of a three-part series on tax filing options for small businesses. Part Two focuses on retail (storefront) tax preparation sites and is posted here. Part Three looks at when it might be appropriate to hire an accountant and is posted here.|
H&R Block At Home
H&R Block also offers some DIY tax products for small business owners. For those who are self employed or own rental property—and won’t need to file any business forms beyond a 1040 Schedule C—the At Home Premium program may be a good option. If completed online, At Home Premium only costs $49.95 for one federal e-file. But, as with TurboTax, each state e-file requires an additional cost, in this case $34.95 per state return.
Entrepreneurs who will be filing their business and personal taxes together should consider H&R Block’s downloadable At Home Premium & Business package ($79.95), which includes five federal e-files and allows you to file your state taxes for $19.95.
For a self-employed individual who will only file a 1040 and a Schedule C, H&R Block also offers its Best of Both package ($79.95). Best of Both allows you to prepare your taxes online while also having an H&R Block professional review your return and then e-file it for you. State filings with the Best of Both package cost $34.95 per return.
The added peace of mind that comes with having a tax pro review your return is the major benefit of the Best of Both package, but even if you’re doing your taxes on your own, it pays to have someone help you get organized. “If you’re a kitchen table business, I think that you’re probably going to be fine with [tax prep software],” says Wooley. “But I encourage entrepreneurs to get a really good bookkeeper to set up a program in QuickBooks. [The software] will import that tax information directly from QuickBooks.” As Wooley notes, nearly all major tax prep software models will import data from popular bookkeeping programs like QuickBooks and Microsoft Money.
TaxACT offers tax preparation products comparable to those offered by TurboTax and H&R Block, but follows more of an á la carte pricing structure. With TaxACT, small business owners purchase downloadable Business 1065, 1120, or 1120S software packages separately for $39.95 a piece. Each download includes one federal filing. To file additional state 1065, 1120, and 1120S returns, however, you must pay an extra $14.95 per state. For companies with locations throughout the country, TaxACT also offers an All-States edition that lets you file in as many states as necessary for $51.80.
For entrepreneurs looking to combine the preparation of their personal and business taxes, TaxACT also offers a Home & Business package for $54.95 that bundles a Business 1065, 1120, or 1120S return (and one free federal e-filing) with free federal and state 1040 returns. But, as with its other platforms, the filing of state returns, both business and personal, costs extra.
Like H&R Block and TurboTax, TaxACT offers advice and support from its network of tax professionals. E-mail support is free, but access to a tax specialist via telephone costs one flat fee of $7.95. H&R Block and TurboTax, however, offer the same phone consultation service at no additional charge.
The tax software that represents the best value for you will naturally depend on the specific needs of your business. Every service you encounter will boast of maximum refund and accuracy guarantees, but bear in mind that even TurboTax plainly states that its top-tier small business software works best for companies with revenue of less than $250,000 and fewer than five employees. As Wooley says, “The more employees and investors a business has, the more imperative it is to get a reality check from a human being. Your business is intuitive to you, but the tax code isn’t intuitive to anybody. There’s an education out there you have to go through, and you can’t always get it through software.”