Is Tax Software Worth It?

The honest answer is yes—for some taxpayers.

But before you drop $60-100 on software and e-filing fees, understand what it does—and what it doesn't do.

Tax software performs two main functions that can help save time and avoid errors. First, it does most of the math calculations for you. As long as you answer every question correctly and enter the right raw numbers, your return should have no computational errors.

Second, it repackages the tax forms and IRS instructions into a step-by-step question and answer format, which some taxpayers find more user friendly than IRS publications. For taxpayers with straightforward tax situations, this format can reduce the amount of time it takes to complete a return.

Note that while these programs reword the IRS instructions (so they can be copyrighted), the substance of those tax rules are are available for free on the IRS website or in IRS publications. And user friendly or not, you still have to spend time organizing, preparing, and entering all your data.

Now let's be clear about what tax software can't do:

• It can't exercise judgment.

• It can't detect subtleties that may affect the proper tax treatment of an item.

• It can't (normally) tell when you've omitted important information or entered data incorrectly.

• It can't tailor advice to your unique circumstances.

• And it can't conduct a two-way conversation to ensure you fully understand the answers to any questions you might have.

 

 

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Why Choose Hamilton?

Maybe you find the tax code too complicated. Or you have a specific issue to work through. Or maybe you just have better things to do with your time.

Before you go to a CPA or chain preparer, consider this:

• At a chain, you'll probably deal with an hourly employee (sorry, "tax pro") whose first duty is to maximize profit by limiting the time spent with each customer or by "upselling"—enticing you with a coupon or low advertised price, then pressuring you to buy additional services like Refund Anticipation Loans or accuracy guarantees. (Or worse, charging you for unnecessary or incorrect forms, as in the example below.)
• At a CPA firm, you'll pay a premium price—but your return might still be prepared by a non-CPA, with only a quick review by a certified public accountant. And despite the high prices, CPA firms make mistakes, too.

At Hamilton, you'll get personal, professional service at a fair price, with no pressure to buy so-called "value added" products. (We don't offer them.¹)

How do we treat our customers? Some examples:

Client A was a 20-year customer of Chain X, but after a $384 tax preparation bill in 2007 she decided to try Hamilton. Our fee? $240—a 38% savings. But there's more. At no charge, Hamilton helped Ms. A recover two years of excess tax preparation fees from Chain X.

Chain X overcharged Ms. A by preparing multiple Schedule C's when a single Schedule C-EZ was sufficient. When asked why they didn't prepare a C-EZ, Chain X said they were "unable" to do so. Imagine that! One of the nation's biggest tax preparers, unable to prepare one of the simplest forms. (Of course, the simpler form might have meant lower fees.)

Chain X also overcharged Ms. A by preparing a Form 2210 (underpayment penalty) for two years when it was not required. (In fact, the IRS expressly instructs taxpayers in Ms. A's circumstances not to prepare it.) Chain X's national headquarters refused to refund the charges until we demanded to see the IRS rule that applies to them but not to other preparers.

Client B, a couple, had their 2006 taxes done by a local CPA. We found three errors in the return, two of which affected their tax liability. (The third mistake didn't affect their joint tax liability, but did create an error in Social Security Administration records.) We corrected the two prior returns, then helped them recover $300 in tax preparation fees from the CPA firm.

Client C, another couple, tried to prepare their own return using a well known software program. Despite many hours of frustration, the software failed to read the client's mind (surprise!) or explain how to handle their particular tax situation. As a result, it computed the wrong tax, which would have led to penalties and interest. Fortunately, the client suspected something was wrong and contacted Hamilton for help. We carefully explained where the error was made and prepared correct federal and (multiple) state returns.

 

¹In 2011, we are offering (at no charge) the Western Union prepaid debit card as a refund option. While this may be considered a value-added product, it's essentially free.

We offer free electronic filing of federal and state returns. With IRS direct deposit, you can have your refund in as little as 10 days.