Small business owners can prepare their own tax returns for a fraction of the cost of tax professionals. Starting your own business is hard work and with most CPAs charging a minimum of $500 for a business return, the cost savings can be a big relief. We identify the best small business tax software based on price, features, and ease of use. Most business owners require a bundle of returns, so be sure to consider the total cost of preparing all your necessary returns. If you’re not sure what returns your business is required to file, see our section at the end of this article for help.
Top 5 Tax Software Options for Small Business
- TaxAct: Best overall small business tax software
- H&R Block: Best inexpensive tax software for corporate and partnership returns
- TurboTax: Best small business tax software for freelancers and self-employed
- TaxSlayer: Best inexpensive tax Software for freelancers with advice From Tax Pros
- FreeTaxUSA: Best free small business tax software for freelancers
TaxAct: Best Overall Small Business Tax Software
TaxAct is our best overall tax software for small business owners because you can prepare both your individual return and business return in its online program. TaxAct is the only software reviewed that offers online preparation of both individual returns (Form 1040) and business returns (Forms 1120, 1120S, and 1065). The biggest drawback to the online program is that the price includes only one return, whereas desktop programs can be used for multiple returns. The typical business owner will spend $285 for their individual and business returns.
Our Expert Opinion
TaxAct has a dashboard that shows all your current and prior-year returns filed with TaxAct Online. You can start a new return of any type with one click that begins the TaxAct interview process. Start as many returns as you like and only pay when you are ready to file. The dashboard also provides other useful tools like a quick tax estimator and tax planner.
Income and expenses can be imported from virtually any bookkeeping software by means of a CSV file. TaxAct provides a link from the interview to the help section that explains exactly how to format your CSV file or spreadsheet for import. You can get answers to your tax questions in its Answer Center, but you can’t talk directly with a tax professional.
H&R Block: Best Inexpensive Tax Software for Corporate and Partnership Returns
With H&R Block desktop software, you can prepare the entire bundle of required returns for business owners for a low fee. For just $119.85, H&R Block Premium and Business will prepare and e-file both your personal federal and state returns (Form 1040) and your federal and state business returns (Forms 1120, 1120S, and 1065). E-filing of state business returns are not available in all states.
Our Expert Opinion
H&R Block offers small business owners the option to file either online or with downloadable desktop software. We recommend the desktop software. Not only is the desktop software considerably less expensive, but the business returns (Forms 1120, 1120S, and 1065) are not available in the online program. The downside of the desktop software is that it doesn’t include assistance from a live tax professional, which is available with the online program.
TurboTax: Best Small Business Tax Software for Freelancers and Self-employed
TurboTax Live is our choice as best for self-employed and freelancers because of the ability to consult with a tax professional. The price also includes a line-by-line review of your return by the tax professional. Unfortunately, owners of corporations or partnerships will have to separately purchase TurboTax Home & Business desktop software, which doesn’t include consulting with a tax pro. TurboTax Live Self-Employed is $200 plus $55 per state.
Our Expert Opinion
TurboTax Live Self Employed is a good option for self-employed taxpayers that are unsure of their ability to file their own taxes. You’ll have access to a tax pro year-round, not just while you’re filing a return. TurboTax Live Self Employed has many features you wouldn’t expect from tax preparation software like preparing W-2s and 1099s for your employees and a year-round tax estimator for midyear tax planning.
If you own a C-corp, S-corp, or partnership, you’ll also have to purchase and download TurboTax Home and Business to prepare your business return. You can import your income and expenses from QuickBooks Desktop and receive on-screen guidance to maximize your business deductions. While you don’t have access to tax pros for business returns, you can contact customer support via telephone.
TaxSlayer: Best Inexpensive Tax Software for Freelancers With Advice From Tax Pros
TaxSlayer is ideal for self-employed persons who need a value-priced program to file Schedule C but still want the ability to speak with a tax professional. If you own a corporation or partnership, you cannot use TaxSlayer to file your business tax return. TaxSlayer Self-Employed features priority customer support, a simple interface, guidance for deductions, and audit assistance. Most self-employed people or freelancers will pay $88 to file both their federal and state returns.
Our Expert Opinion
TaxSlayer is a good cloud-based tax preparation software for individuals that are self-employed or freelancers. It provides access to live tax professionals with expertise in the self-employed tax area. It has many features you expect like a deduction finder and tax tips. Its support section provides professional answers to common tax questions and can be browsed by either tax topic or tax form.
The biggest drawback of TaxSlayer is that you cannot file corporate or partnership returns. Other missing features include the ability to import your Schedule C business income and expenses as well as import your capital gain and loss transactions. If you buy and sell stock frequently, it can take considerable time to enter all the transactions by hand.
FreeTaxUSA: Best Free Small Business Tax Software for Freelancers
FreeTaxUSA is ideal for self-employed people looking for free tax software to file their individual federal tax returns, including Schedule C. FreeTaxUSA is not a scaled-down version of a paid subscription. This is a full-featured tax preparation software that includes all forms that most self-employed taxpayers will need. However, FreeTaxUSA cannot prepare C-corp, S-corp, or partnership returns.
Our Expert Opinion
FreeTaxUSA is a great option for taxpayers that are confident in their ability to file their own tax returns. The software supports nearly any self-employed business situation as well as other common tax items like itemized deductions and rental houses. There are very few, if any, taxpayers that couldn’t file with FreeTaxUSA.
The biggest drawback to FreeTaxUSA is its limited customer support. There is no access to a tax professional. It also doesn’t have a self-help database to consult. Your only option for customer support is to send a message and wait for a response. However, for a $6,99 upgrade, you can live chat with customer support.
How to Choose the Best Small Business Tax Software
When deciding on a business tax software, you should also consider other business systems your small business requires and try to select a combination of software that best fits your needs. To choose the best small business tax software, you need to understand which returns you must file. How your business is organized for tax purposes will determine the required returns to file.
Filing Requirements for Self-employed, Sole Proprietorships & Freelancers
Self-employed taxpayers, sole proprietorships, and freelancers are treated the same for tax purposes. These businesses must report their income on Schedule C of the individual tax return, Form 1040. There is no separate business tax return.
Filing Requirements for C Corporations
C corporations must report their business income and tax liability on a corporate tax return, Form 1120. All business income is taxed on the corporate return and has no effect on the individual tax return unless the corporation pays dividends to the owners.
Filing Requirements for S Corporations & Partnerships
S corporations and partnerships are required to report their business income on a federal tax return filed separately from the owner’s return. S corporations must file a Form 1120S, and partnerships must file a Form 1065. Both Form 1120S and Form 1065 include a Schedule K-1, which shows each owner’s share of the business income. The income on Schedule K-1 is commonly referred to as flow-through income and reported on the owner’s individual return, Form 1040, Schedule E.
Filing Requirements for a Limited Liability Company (LLC)
An LLC may be treated as a sole proprietorship, C-corp, S-corp, or partnership. Read our article on small business LLC taxes & tax returns to determine how your LLC is treated and which tax returns to file.
Costs & Features to Consider
In addition to federal returns, most individuals and businesses must file state returns. When comparing the cost of small business tax software, be sure to include the cost for all your required returns.
Most small business tax software now has the option to consult with a live tax professional. In my 25 years as a CPA, I have corrected many returns that were self-prepared by business owners. The software can only produce accurate returns when you enter accurate information. Answering a question incorrectly can have a dramatic effect on a tax return. The more complicated your return, the more important it is that the software provides a tax professional to consult with during the preparation.
The key features you should look for in small business tax software are:
- Cost: Owners of corporations and partnerships generally require at least four returns, and sole proprietors require at least two returns.
- Support for tax forms: The tax software can prepare business entity returns for S-corps (Form 1120S), C-corps (Form 1120), partnerships (Form 1065), sole proprietors (Form 1040, Schedule C), and rental property (Form 1040, Schedule E).
- Data import: Tax software can import data from bookkeeping software and financial institutions.
- Deduction finder: The tax software helps business owners find deductions for their industry and pick the best way to deduct depreciation and car expenses.
- Error checking: The tax software must have diagnostics to check for mistakes and potentially missing data.
- Live tax professionals: Consultation and perhaps even a review by a tax professional is critical for complicated returns. Simply clearing all the issues from the error check does not guarantee the return is correct. Preferably tax professionals should be either CPAs, EAs, or lawyers, instead of somebody trained by the software provider.
- Ease of use: The tax software must be relatively easy to learn and navigate.
- Customer support and help resources: The tax software must provide an online knowledge base and customer support by phone or email.
Small business owners should consider their needs carefully when choosing tax software for preparing their business and personal tax returns. If your business is a corporation or partnership, you need software that will prepare Form 1120, 1120S, or 1065 in addition to your personal Form 1040. You want software that will make it easy to transfer your accounting data, maximize your tax deductions, check for errors, provide unlimited customer support, and consult with a tax professional when you need it.