The Effectiveness of Tax Software to Individual Tax Payer
The Effectiveness of Tax Software to Individual Tax Payer
Tax software is a type of computer software design to help individuals or companies prepare for and file income, corporate and similar tax return. It streamlines the process of filing taxes by walking through tax forms and issues and also automatically calculates individual’s or companies’ tax obligations. Moreover, tax time does not have to be painful. Using an online eFile tax service, most taxpayers can create accurate federal and state returns within minutes.
If there are complex tax situation, the top-rated online tax software can guide individuals through earned credits and deduction and income declaration requirements to create the most beneficial return as possible. After 40 years, Tax works knows professional tax software. It began as a software developer and service bureau in 1972. The primary products relate to tax preparation software for the professional preparer. The software was originally designed in 1972 to run on a large IBM mainframe computer. In 1978, the system was converted to run on microcomputers.
In 1986, it added the capability of printing complete tax returns on the Hewlett-Packard LaserJet printer. For years it had offered data sheet input, but in 1987, the popular interview input system was added to allow the preparer to enter information directly onto the computer while interviewing the client, eliminating the need for data sheets. Returns could be processed individually, while the client waited, or in a batch mode, after data for several clients had been entered. Also added in 1987, was the capability to file individual returns electronically.
In 1988, the refund anticipation loan program was implemented. These options allowedthe client a refund anticipation loan time of five minutes to two weeks. In 1988, it adopted the product name Tax Works for its tax preparation software. TaxWorks was designed to help individuals manage their tax practice. The program allowed them to store tax data, customize letters, manage information, bill clients, and retrieve information on demand. In 1996, it enhanced the program to run in a DOS or Windows environment. In 1997, it introduced the Windows version of Tax Works.
In 1999, it eliminated the DOS product and has focused all of its efforts on developing a superb Windows program. Electronic filing was added for partnerships in 2000, corporations in 2004, exempt organizations in 2005 and fiduciaries in 2007. In 2003, it moved the E-File Center to a web based platform where e-file data resides on a secure server. In 2004, it began implementing the new IRS Modernized e-file (MeF) program. And now in 2012 it introduced a new, cleaner, client-focused interface that will take their tax practice to the next level.
As the industry moves forward, they are working to keep Tax Works at the forefront of professional tax preparation technology. Tax Software has become an annual part of many taxpayers’ lives. While many professionals’ preparers are required to file their clients’ tax returns electronically, individual filers increasingly rely on tax software as well. (Pippin et. al, 2010) According to the Wall Street Journal (Olson 2009), filing taxes is so overwhelming and complex that over 80% of individual taxpayers seek help.
Many choose to use professional preparers; others turn to individual tax software. For the average taxpayer, professional preparation or tax software serves as means to meet tax responsibilities without having to understand the nuances of the tax law. This shift of responsibility to professional preparers or tax software seems to give tax payers the comfort that the tax return will be correct, that there are no potential missed deduction, and that the risk of an IRS audit has been minimized.
Olson further stressed that tax software is automatically updated to tax law changes. It is easy for individuals to use tax software even though they are not familiar with the tax law. It is more convenient for the taxpayers to file their income tax return electronically rather than manually because it offers audit support or “advertise 100% accuracy guarantees,” which may encourage tax payers to believe that tax software reduces their liability in the case of an IRS audit. Nowadays, individuals usually rely on technological services for their ease and convenience.
It also increases individual productivity by using internal arithmetical checks and automatic account balancing features to limit input errors. Additionally, input errors can usually be corrected quickly and easily, allowing more time to be spent on other tasks. Related Studies Individual acceptance of technology is widely studied in many disciplines, yet investigations related to the diffusion of computing technology and the use of tax software are relatively recent. The authors based their study on the models and findings of prior research indicating that people use technology for a variety of reasons and purposes.
Users’ perceptions about software performance; their anticipated learning curve; the influence of their superiors, family, and friends; and other conditions traditionally determine their use of technology. (Davis, 2003) Research into technology acceptance has shown that individuals’ perception related into an information technology product, such as tax software, influence their willingness to accept and successfully use such products. An area not yet researched extensively is how the relationship between various factors and software use may differ across disparate user groups.
This survey shows that certain differences exist between professional tax preparers and novices: Compared to novice users, professional preparers have a more positive view of tax preparation software in every dimension measured. Professionalpreparers are more likely to use tax preparation software to prepare their personal tax returns. For professional preparers, the choice to use software is most strongly influenced by their desire for a well- performing tool . Use of tax software depends on the influence of family and friends and the anticipated learning curve.
Anders found out that approximately 50% of survey participants indicated that their turnaround time to prepare tax returns had stayed the same over the past five years, while the other 50% were about evenly split between reporting an increase or a decrease. This may indicate that firms have already achieved good efficiency levels through the use of technology, and that further large-scale improvements in turnaround time are unlikely. Furthermore, respondents’ resistance to outsourcing may be due to concerns about the impact on turnaround time.
Through the years, the best online tax software continues to improve. In fact, the IRS now recommends eFiling as the most accurate and efficient way to file your federal 2011 tax return. Online tax preparation services have also increased their offerings; many now offer free tax help and audit support as well as help with filing prior-year returns. Most have also collaborated with the IRS through the Free File Alliance group and have agreed to provide free federal eFiling to many taxpayers. The majority of the tax services we reviewed provide free 1040EZ eFiling.
For the most part, if you file a simple federal return you only have to pay to file your state return. The best online tax preparation services and tax preparation software products guide you through the filing process and will ask you all the questions necessary to help you maximize your deductions and credits. They also check for inconsistencies and inaccuracies. When testing tax software we looked for two major necessities: accuracy and ease of use. We rated highest the tax preparation services that can easily guide you to an accurate return regardless of your tax knowledge.
We tested every tax service with the same tax scenario to compare refund amounts and ease of use. We also gathered numerous screenshots and current pricing so you can easily decide which online tax software will work best for your tax situation. Accuracy Many online tax services tout that they can provide the largest refund; however, the largest refund (or lowest owe amount) results from an accurate return, not a hidden tax loophole that only they know about eFiling with a good online tax service is one of the best ways to ensure that your return is correct with the most up-to-date forms andtax law changes included.
Even the IRS endorses eFiling as the “safest, fastest and easiest way to submit” individual tax returns. We rated highest those that created an accurate return which also included tools for preventing errors. Ease of Use Since panic attacks mixed with math anxiety and general confusion seem to pervade tax time, we ranked higher the easiest-to-use tax services. Using the best tax software, you should be able to create an accurate return tailored to your unique circumstances without having extensive tax knowledge.
The best online tax software should complete all math computations for you and be designed to catch common entry errors. Top tax preparation software should not be more difficult to use than answering a few life event questions and filling in the blanks. Most services also provide useful tools such as tax calculators and tax estimators to assist you. Help and Support Though the online tax software should be simple to use, adequate customer and technical support should be readily available if you need it. Note that online tax preparation services can only provide limited tax support after you file.
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 23 November 2016
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