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Tax Software: Online or Desktop

Is One Better, Safer or Faster?


Trying to decide between online and desktop tax software? Here are six differences to consider when choosing tax software.

Whether you use desktop or online tax software, always keep a copy of your tax return in a safe place.

1. Installing Tax Software: Online Is Easier

Woman with documents holding receipts with laptop
Artifacts Images/Photodisc/Getty Images
Desktop tax software is installed from a software CD, or a download when purchased online. There is a slight chance of the installation not working because of incompatibilities with software already installed on your computer or with hardware. Though the chance of this happening is small, troubleshooting tax software installation problems can be a challenge because everyone's system is different.

Online tax software requires no software installation and does not change anything on your computer since it runs through an Internet browser like Chrome, Internet Explorer or Firefox.

2. Convenient Tax Prep: Online Has Advantages

TurboTax Free Edition for doing taxes online.
TurboTax Free Edition / Intuit Inc.
With online tax software, you can work on your income tax return where ever there is an Internet connection. If you use tax software installed on your hard drive and don't have a laptop computer, you can obviously only work on your taxes at home or where your computer is located. Although this isn't an issue for everyone, online tax software is convenient if you need to work on your return from different locations.

Online tax software users should avoid public computers, such as those found in the library or coffee shops. If you must use a public computer to complete your tax return, be entirely sure that you log off and close the browser window before leaving the computer so no one has access to your financial data.

3. Tax Software Updates: Online Interferes Less

TaxACT Tax Alerts let you correct errors on your income tax return before you file.
TaxACT Tax Alerts / 2nd Story Software
Desktop tax software either automatically checks for updates or prompts you to check fairly often, especially if it's a year when tax laws are being negotiated late in the year. Updates are necessary because income tax software is available each year before the IRS has ironed out all new income tax codes. Releasing the software early lets you get started on your return. While tax software updates generally go smoothly, there is a chance that an update will conflict with something installed on your computer, prompting a call to tech support.

Online tax software is updated automatically on the file server that hosts the software, so you when you open the software in your browser, updates are already installed.

4. Tax Data Security: Desktop or Online Tax Software

Keep your financial data secure with a solid password and other financial data security measures.
Getty Images/Medioimages/Photodisc
While desktop tax software provides ultimate control over income tax data by keeping the data locally on your personal computer, if you don't use good antivirus and firewall software and keep it updated, you risk a chance of having your computer - along with your tax data - hacked into.

Online tax software is very secure, with the trusted popular titles having the same security used by financial institutions protecting and encrypting tax data files. Check the privacy and security policies of online tax software to be sure it provides the best online data security.

5. Tax Data Storage: Desktop Tax Software

Get started with H & R Block At Home at the main menu.
H&R Block At Home / HRB Digital, LLC
Desktop tax software saves a data file until it is deleted, and that data is only readable in the same tax software from the tax year used to create the return. Hold on to that software if you want to do what-if scenarios or otherwise access your return via the software.

Online tax software typically saves a tax return for three years, which usually fine according to tax advice from William Perez at About.com Tax Planning. Online tax software lets you save a return as a PDF and the raw data is not stored on your computer. If you want to keep copies for more than three years, you can save the PDF to your computer, online storage like DropBox or removable media such as a USB drive.

6. Backing Up Tax Data: Online Tax Software is Easier

Redesigned CompleteTax Help Center
CompleteTax Help Center / CCH, a Wolters Kluwer business
Online tax software saves data often while you work in the software and when you log out, and maintains secure, encrypted copies of tax data in at least two separate physical locations to ensure that your data is not destroyed due to a flood, storm or other disaster.

Desktop tax software users need to check the settings in the software to be sure that data back up automatically and frequently in addition to saving tax work when the software closes. Back up desktop tax software data to a USB drive, network attached server (NAS) or to an online backup service. Do not use your hard drive as the only place tax data files are backed up to. If the drive fails, you'll have to start your return from scratch.

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