Question 1

What is tax preparation software?

Accepted Answer

Tax preparation software guides users through income entry, deductions, credits, and calculations, then generates and e-files federal and state tax returns. Consumer versions serve individual filers, while professional versions help CPAs and enrolled agents prepare client returns at scale.

Question 2

How much does tax preparation software cost?

Accepted Answer

Free tiers exist for simple federal returns with W-2 income. Mid-tier consumer packages typically cost $50-$90, and full-featured versions with state filing, investment income, and audit support run $90-$130. Professional suites for tax preparers are priced per return or as annual firm licenses starting around $500.

Question 3

Can tax preparation software handle small business returns?

Accepted Answer

Yes, most mid-to-top-tier consumer products support Schedule C for sole proprietors, and dedicated small business tiers add forms for partnerships, S-corps, and multi-state filings. For more complex businesses, professional software like Drake, ProConnect, or Lacerte is the standard choice.