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Pitfalls of Tax Preparation Software

As 2020 tax reporting season is approaching, individual taxpayers have started preparing themselves with different methods to file their tax returns. Some may consult a tax professional and some may utilize software programs that assist individuals with tax preparation.  Such software had been developed in order to facilitate the rather complicated tax filing procedure for individuals that seek for a more convenient and time-efficient method. Proper use of these programs would save time and money for individual taxpayers. Nevertheless, these programs involve some pitfalls which users need to be aware of.

Improper use of tax prep software could cause errors in your filing. Computer software lacks human touch. Although most software provides instructions, the standardized instruction does not fit into all situations of individuals. When users have questions about filing, it cannot further assist the user. To prevent the errors, users will have to conduct a tax research for unknown topics which may consume more time. Despite the extra time put in, users experience frequent errors in the filing. As a result, the users may receive a letter from the IRS or become subject to audit and penalties. 

Many tax prep software involves additional fee. It is quite common that users are unaware of additional fees. Some tax preparation software requires additional payment to claim some credits. Some developers classified the software into standard, deluxe and premium versions and restrict the scope of service for different versions. Such strategy of developers allures customers to pay additional fee for further service. Although the program notifies possible additional fee in the instruction, it is often ignored or hidden in fine prints. Therefore, it is recommended that the users carefully go over the description box and figure out whether extra fee may be required.

Security concerns are the most often ignored drawback of tax prep software. Easily accessible and seemingly free technology frequently blinds the individual taxpayers from an important aspect of online software; the risks towards personal information. Individual taxpayers need to know that they are risking their private information while they use such software. Past cases from Uber and eBay suggest that it is possible that your personal information may be leaked.                

Even with the pitfalls, it is evident that tax preparation software could save you time and money. Using such software further helps prevent typing errors that frequently occurs while filing complicated documents. Although, consulting a tax professional is the best way to minimize errors, tax software is still the optimal method for millions of those who need to save time and money, only if the users clearly understand the potential disadvantages of tax preparation software.      

Sungsu Park/Tax Advisors for Champaign Society (TACS)


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