Tax law can be complicated. Since most of us don’t prepare tax returns for a living, we don’t always know we can and can’t deduct. To add to the pressure, if you make a mistake on your tax return, it can cost you. Not only could you owe more taxes, but you may also get hit with penalties and interest.
Why Self-Employed Professionals Need Tax Software Programs
Tax software programs are an economical way for self-employed individuals and freelancers to file their tax returns. Their simple step-by-step approach makes it easy to prepare and submit your tax filing. Plus, they can identify deductions and credits that may be available, so you don’t pay more in taxes than you should.
How to Choose an Online Tax Software Provider
You have a lot riding on your online tax software provider. If your tax return has mistakes or is filed late, you can be penalized. Key factors to consider when choosing an online tax software package include;
Reputation and experience: You place a lot of trust in the online software that you choose. Are they well-known for tax preparation? Is their software updated for the most current changes in tax law? Do they have the resources to ensure their calculations are correct?
Their track record is important. Online reviews are an excellent way to get a glimpse into the company and how satisfied their customers are.
No tax knowledge necessary Online tax software is made for people who have no tax knowledge. Most online tax software programs take a “question and answer” approach. As you answer the series of questions, the program guides you through the process of completing your tax return, based on your answers. It helps you identify what deductions you may be able to take and credits you may be entitled to. Once you’ve finished the step-by-step process, the program does a final review of your return and points out what may be missing. If it looks good, the program makes it easy to e-file your federal tax return.
Support: If you run into a problem or need help when answering questions, how robust is their customer support? Can you speak with a live person or is their support limited to online content only?
Quality of work: It’s unfortunate, but software mistakes can happen. If there is an error in a calculation, does the software provider stand behind their work? Many companies guarantee the accuracy of their results. They may reimburse your tax filing fees and even cover some, if not all, of the penalties and interest you incur.
Which Tax Return Should I File If I'm Self-Employed?
Many freelancers and self-employed professionals include their business activity on their individual tax returns. So, if you are a sole proprietor or are set up as a limited liability company but choose to report your business activity on your personal tax return, you will include this information on Schedule C on your Form 1040 tax return.
If your business is set up as a partnership, you will need to file Form 1065 U.S. Return of Partnership Income. Depending on their type of formation, corporations file either Form 1120-S: U.S. Income Tax Return for an S Corporation or Form 1120: U.S. Corporation Income Tax Return.
To make it easier at tax time, choosing a provider that can handle both your business and personal tax return is helpful.
TurboTax, H&R Block, and TaxAct have tax software solutions where you can file a partnership or corporate tax return for an additional fee.
TurboTax Business: To prepare these returns using TurboTax Business, you download the software from a CD after purchase.TurboTax charges $170 for the preparation, printing, and free e-filing for up to five federal tax returns. Software for state returns cost $55 with a $19.95 e-filing fee due for some states. You do have the option to print your federal and state returns and mail them in.
If you have more than one company, TurboTax lets you prepare multiple tax returns. Should you need help using the product, phone support is available.
H&R Block Business: H&R Block offers a Premium and Business package whereby you can file both your individual and small business return, however you’ll need to download the software. You can e-file your personal, corporate, and most state tax returns. The Premium and Business package is $89.95 and includes preparation of unlimited business returns and one state return. Software for additional states cost $39.95 per state. You can e-file up to five federal returns for free, however a $19.95 fee is charged to e-file a state return.
TaxAct Business: You can prepare your small business tax return with TaxAct’s online tax software. Unlike the business tax return software for TurboTax and H&R Block, you don’t pay TaxAct until you are ready to file. TaxAct charges $109.95 for one partnership or corporate tax return and $49.95 for each state tax return. There is no additional fee to e-file the federal return, however TaxAct charges $19.95 to e-file state returns.
The Top Online Tax Software Programs for Freelancers and the Self-Employed
Most online tax software programs are designed for people who have little to no tax knowledge. They work well for most freelancers and self-employed professionals who do not have overly complicated tax returns.
Some of the most popular online tax software programs include:
TurboTax for Self-Employed
TurboTax is one of the most popular tax preparation software solutions on the market. It was developed in 1984 and later sold to Intuit, a well-known personal and small business accounting software provider. TurboTax features a wide range of options for individual and corporate tax returns.
If you are a freelancer or self-employed, it has two plans geared to your needs. By answering a few questions about your business, TurboTax helps you save money by identifying common deductions in your industry.
Ease of Use: There is no charge to get started using TurboTax. Once you set up an account, TurboTax guides you through the tax preparation process. You’ll know when to drop in or upload financial information. As you answer questions, it can help you locate deductions that you may not even know were available.
Costs and Fees: TurboTax has three packages targeted to those who are freelancers or self-employed.
- Self-Employed – You can prepare your personal income tax return, including Schedule C reporting of your small business income and expenses for $120.
- Self-Employed Live- Provides access to a tax expert who can answer your questions and review your tax return for an additional $80.
- Self-Employed Full Service – If you prefer to have a tax expert prepare your returns, TurboTax offers this service for $290.
Need to file a return in your state? Just add this to your TurboTax plan for an additional $50 to $55, based on the package you choose.
Customer Support: Have a question or run into a problem completing your tax return; TurboTax has several support options; One on One support, User Community, Online FAQ, and help from a tax expert.
Review and Guarantee: If filing your tax return online makes you a little nervous, TurboTax goes through a comprehensive review of your filing before you can submit it. To help maximize your deductions, TurboTax compares your tax filing against its database of over 450 deductions. TurboTax guarantees its calculations. Should an error be made, they will take care of any penalties you incur as a result.
H&R Block for Self-Employed
H&R Block has helped people file their tax returns since 1955. The company started as a brick-and-mortar tax preparation service. Today, H&R Block has over 12,000 walk-in locations throughout the country. It also offers online tax preparation and filing services.
Ease of Use: You can start using H&R Block’s online service for free. It features a simple walk-through process that helps self-employed professionals and freelancers identify deductions that are common in their industry. If you use the Stride app to track your expenses and mileage, you can upload it into the software.
Costs and Fees: H&R Block features two plans that make it easy to compile your business's income and expenses.
- Self-Employed – File your individual and small business return online for $84.99. State returns are an additional $36.99 per state.
- Self-Employed Online Assist- If you like the idea of on-demand, unlimited expert help with your tax filing, you can opt for the Online Assist plan for $144.99. Add $36.99 if you need to file a state tax return.
You can also have an H&R Block tax professional prepare and file your tax return. Choose to meet in person or virtually. Fees for this service start at $69 for federal tax returns. State filings carry an additional fee as well.
Customer Support: H&R Block has a variety of customer support options. You can find answers to common questions online. Phone and chat support is available with paid plans. If you prefer in-person support, you can also visit a walk-in location.
Review and Guarantee: H&R Block automatically reviews your tax return before it is filed. If you get a tax notice about your return, H&R Block helps you prepare a response at no charge. They guarantee their software's accuracy and will reimburse you up to $10,000 for any penalties or interest incurred resulting from an error.
And if you find a larger refund or owe less tax if someone else prepares your return, H&R Block will reimburse the tax preparation fees you paid to them.
Jackson Hewitt for Self-Employed
Named after its founder Jackson Hewitt, the company got its start when it purchased six tax preparation outlets in 1982. Today, Jackson Hewitt operates almost 6,000 locations throughout the country. You can even find them in your local Walmart store.
Jackson Hewitt offers self-employed or freelancers the ability to file their tax returns online or in-person at a local office.
Ease of Use: \Once you set up an account, the program walks you through a series of questions to help identify deductions and credits you may be entitled to. Afterwards you can e-file your tax return.
Costs and Fees: Jackson Hewitt doesn’t have a dedicated plan for freelancers or self-employed professionals. Instead, they offer one plan for $49 that covers all filers. Plus, there is no additional fee to file a state tax return. If you don’t have to file a state tax return, you only pay $25 to prepare your federal tax return online.
If you prefer to have a tax professional prepare your return, you can have a tax professional prepare this without ever leaving your home. Virtual tax preparation for self-employed filers costs $249, plus an additional fee for a state return.
You can also drop off your paperwork at a Jackson Hewitt location to have your returns onsite. Fees for in-person tax preparation vary by location. if you have up to
Customer Support: There are plenty of ways to get help with Jackson Hewitt if you need it. Check out their online FAQ page for answers to common questions tax filers have. They offer customer service via chat or phone seven days a week. Expert help is not available with their online software. You’ll need to have a tax professional from Jackson Hewitt prepare your return if you want expert assistance.
Review and Guarantee: Should you be penalized due to an error in Jackson Hewitt’s online tax software, the company will pay any interest and penalties that result. They will also refund your tax preparation fees if someone else gets you a bigger refund, lowers your tax bill, or if you are unhappy with their service.
TaxAct for Self-Employed
TaxAct was founded in 1998 and released its first cloud-based tax preparation software solution in 2000.
Ease of Use: Similar to other online tax software programs, you’ll be asked a series of questions to set up your account. Follow its step-by-step process to calculate the income and expenses associated with your business. The program features the TaxAct Deduction Maximizer, which is a great way to find tax savings if you are self-employed or a freelancer. As you answer questions, the software identifies deductions and credits that you may be eligible for. To help save time, TaxAct lets you import data from your prior-year tax return, charitable contributions, and W-2s.
Costs and Fees: TaxAct has a dedicated plan for people who are self-employed or freelancers. You can file your federal tax return for $79.95. You can also file your state tax return for $54.95.
Customer Support: If you have questions or need help filing your return, TaxAct features an online Answer Center. You can also reach customer support via phone or email. For an additional fee, you can connect with a CPA or tax professional using their XPert Help program.
Review and Guarantee: Before you e-file your tax return, TaxAct walks you through a verification process to ensure there are no mistakes and that you’ve picked up all of the deductions available.
TaxAct comes with a $100K Accuracy Guarantee. Suppose the results are not 100% accurate and you don’t get the maximum refund you are entitled to. In that case, they will reimburse you for your tax filing fees, pay you the difference between your lower refund or higher tax liability, and will cover any audit or legal costs you incurred, up to $100,000 in total.
Find out more about this guarantee and its terms and conditions here.
What is the best free tax software if you are self-employed?
Freelancers and self-employed individuals can prepare and file their federal tax returns for free at FreeTaxUSA. Like other online tax software providers, it is easy to set up and walks you through a series of questions to identify likely deductions and credits.
It has a simple screen design which makes it easy to drop in expenses and income generated from your freelancing or self-employed activities. FreeTaxUSA supports most major tax forms and is a good fit for those who don’t have complicated tax issues.
You won’t find the same customer support features as you would with paid online tax software providers. They have a decent amount of online resources to answer questions and help you along the way, but you may need to upgrade to its Deluxe edition for $6.99 to get priority help, however they do not provide access to a tax professional.
While your federal tax return filing is free, FreeTaxUSA charges $12.95 for each state return.
Is it better to use TurboTax or H&R Block?
TurboTax and H&R Block are two of the best-known online tax preparation packages today. Choosing between the two often comes down to personal preference.
Turbo Tax Pros and Cons:
Pros:
- Friendly interface: With its clean look and step-by-step interview process, TurboTax makes preparing your tax return feel less daunting.
- Integrates with QuickBooks: Freelancers and self-employed individuals who use QuickBooks can save time by importing their data into TurboTax.
Cons:
- More expensive: TurboTax costs more. Its free version is reserved for simple tax returns. Freelancers and self-employed individuals will need to upgrade to a paid version to complete their return. Expect to spend more money with TurboTax.
- Minimum live support: You can get support via online chat or video conferencing. But if you prefer to pick up a phone or walk-in to see a tax professional, TurboTax may not be a good fit.
H&R Block Pros and Cons:
Pros:
- Cheaper option: Self-employed individuals can file their federal and state tax returns for almost $50 less with H&R Block than TurboTax.
- In-person support: If you get into a bind or are just uncomfortable filing your tax return, you can get help at a local H&R Block in your area.
Cons:
- Less intuitive: H&R Block follows a similar step-by-step approach. However, the explanations and questions aren’t as straight-forward as those in TurboTax. : TurboTax costs more. Its free version is reserved for basic tax returns. Expect to pay more money with TurboTax.
- Less flexible: You must complete the sections in order when using H&R Block. But if you don’t have all information readily available, you may find yourself stopping and starting quite a bit. TurboTax lets you skip around the sections, which helps if you haven't received all of your year-end tax documents.
Which is the best tax software if you are self-employed?
If your tax situation is relatively straight-forward and you don’t need a lot of outside help, the free tax filing service at FreeTaxUSA may be a good fit. Jackson Hewitt is a budget-friendly solution that comes with live and in-person support. Their $49 fee covers both your federal and state tax return.
TurboTax is a good option if you need a robust online tax software program that guides you through the tax filing process and integrates with QuickBooks, Or for help that is just a phone call away, choose H&R Block.