Should you prepare your income tax return using online tax software, or should you use tax software installed on your computer desktop? Learn about the differences between online tax software and tax software that runs from your computer's hard drive and choose the tax software that works best for you.
Whether you use desktop or online tax software, always keep a printed copy of your tax return in a safe place.
1. Installing Tax Software: Online Is Easier
Desktop tax software is installed from a software CD or a tax software download, and there is a slight chance of the installation not working because of incompatibilities with software already installed on your computer or with your hardware. Though the chance of this happening is small, troubleshooting tax software installation problems can be a challenge because virtually everyone's system is different.Online tax software has no software installation hassles and does not change anything on your computer since you use it through an Internet browser like Internet Explorer or Firefox.
2. Convenient Tax Prep: Online Has Advantages
With online tax software, you can work on your income tax return from where ever there is an Internet connection. If you use tax software installed on your hard drive and you do not have a laptop computer, you can only work on your taxes at home. Although this is not an issue for everyone, online tax software is convenient for those who need to work on taxes from different locations.Online tax software users should avoid public computers, such as those found in the library. 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 you leave the computer.
3. Tax Software Updates: Online Interferes Less
Good desktop tax software will either automatically check for updates or will prompt you to check for updates often. This is because income tax software is available each year before the IRS has ironed out all new income tax codes. While tax software updates generally go smoothly, there is a chance that an update will conflict with something else 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
While desktop tax software provides ultimate control over income tax data by keeping the data locally on your personal computer, if you do not use good anti-virus and firewall software and keep it updated, you risk a chance of having your computer - and your tax data - hacked into.Online tax software is very secure, with the most popular online software 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 software data security.
5. Tax Data Storage: Desktop Tax Software
Desktop tax software saves a tax 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 using your old tax data.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 saves a return as a PDF and the raw data is usually not stored. If you want to keep copies for more than three years, you can save the PDF to your computer or removable media like a thumb drive.
6. Backing Up Tax Data: Online Tax Software is Easier
Online tax software saves data often while you work in the software and when you log out. Good online tax software 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 disaster.Desktop tax software users need to be sure that the tax software backs up data automatically and frequently in addition to saving tax work when you close the software. Back up desktop tax software data to a USB thumb drive, re-writable CD, network attached server (NAS) or to an online backup service and do not use your hard drive as your only back up medium. If the drive fails, you will have to start your return from scratch.
