Choosing tax software can be confusing. Is one tax software deluxe version the same as another tax software title’s deluxe? Not always. This list of tips for buying income tax preparation software will help you decide what tax software to buy.

2. Do You Need to Prepare a State Tax Return?

The price of some tax software includes a state return, while other tax software charges separately for a state return. If you need to pay for a state return, be sure you know what it will cost you.

If you were a resident of more than one state because you moved part-way through the year and both states collect income tax, you will need two separate state tax returns. If your tax software comes with a state return, you will most likely need to pay for an extra state tax return. If your tax software does not include a state return, you will have to pay for two. Of course, you can opt to do state returns manually or check out the Department of Revenue web site for the state to see if they provide free online income tax filing.

3. Do You Want Online Tax Software or Desktop Tax Software?

There is a good selection available of dependable tax software you install online as well as web-based tax software. Both online tax software and desktop tax software have advantages and possible disadvantages, and if you are not sure which will work best for your income tax preparation, read Online Tax Software or Desktop Tax Software? for help with deciding.

Remember to always keep a printed copy of your tax return in a safe place, regardless of whether you use online or desktop tax software.

4. Do You Need Lots of Documentation for Income Tax Deductions?

Does the tax software include explanations of tax laws or quick links to IRS publications? Better yet, does the software explain how to complete a tax return by using an interview? Both of these features make preparing income taxes less stressful.

If you itemize deductions, a tax deduction finder feature works by asking you questions can dig up deductions you may forget. If you already use tax deduction tracking software and you have made many non-cash donations, you may want to ensure that the tax software will import your tax deduction data.

If you are self-employed, be sure the tax software includes Schedule C and if you are an active investor, a feature for calculating capital gains can save hours.

5. Do You Qualify for Free Tax Software?

If you have a very simple, basic tax return, you need to investigate free tax software which is sometimes provided by tax software web sites. You also may qualify for the IRS FreeFile program.

Watch for added costs for a state return or electronic filing, though.

6. Do You Want to File Electronically?

E-filing fees may be included with the cost of tax software, or there may be a separate charge for it. Find out how much the tax software charges for electronic filing if you plan to e-file instead of printing out and mailing your tax return. If you e-file, there may be separate costs to file your state federal returns.

7. What Kind of Tax Software Help and Support Do You Require?

If you have a question that is specific to using the tax software, you should be able to contact software support by clicking a link in the software, but you may need to wait for an answer.

If you have an income tax-related question, you may have to rely on an online forum linked in the software to try to find an answer, or the tax software may provide limited access to a tax professional.

Is there a toll-free number, email address, chat and/or an online forum available to get answers to your questions about the tax software? Is there help for both using the tax software and for income tax-related questions? Is there a fee for asking a tax professional for help?

8. Does the Tax Software Have a Guarantee?

Does the tax software manufacturer stand behind the accuracy of the product? If you are audited, will the tax software manufacturer provide a tax professional to assist you? Does the tax audit help include a professional representing you in tax court?

9. Does Your Computer Meet the Minimum System Requirements?

Be sure the tax software will run on your computer, especially if you have an older computer and you plan to use desktop tax software instead of online tax software, The tax software box, support web page or other documentation for the software should mention whether the tax software runs on a PC, Mac, or other operating systems and how much hard drive space and RAM is required. Video and Internet-related requirements should be mentioned as well.

10. Is the Software for This Tax Year?

This advice sounds obvious, but income tax software from years past is still for sale online and at some discount software retail stores. The tax software should note which tax year it is to be used for, and the tax references last year. In 2009, you will prepare income taxes for tax year 2008.

You must use new tax software every year due to changes in tax laws.

Source: http://financialsoft.about.com