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Benjamin Franklin once said that there were only two things that were certain in life: death and taxes. The quote is still accurate more than 230 years after his death. It might be even more precise, thanks to the $80 billion funding increase the IRS will receive

The vast majority of American citizens and businesses are all required to pay taxes. The exact amount is based on a percentage of the income earned or received during the year. There are some exceptions to the rules, but it’s virtually guaranteed that you will pay some amount in taxes each year. 

Paying taxes can be a bit overwhelming for first-time business owners. It’s nowhere near the same as filing your personal tax return each year. You’ll have to consider many additional factors, and it’s unlikely that you will get it right the first time. Fortunately, plenty of tax preparation help is available to prevent you from having an unpleasant encounter with the IRS. 

Which tax software is the best for a small business?

The tax code is constantly changing and can look very different yearly. It’s almost like trying to learn a new language each year. You might have some basics, but the details can be other than expected. Fortunately, the available software can stay up to date and help you take care of your taxes.

Interestingly, the IRS may soon roll out its own free tax software. Still, many third-party tax software options exist, and you want to ensure you’re getting the best one for your business. 

Here are four examples of the best tax software available that you should consider first:


H&R Block

Learn MoreOn H&R Block’s Website

H&R Block has been around for more than 60 years and comes with a lot of experience. Filing with H&R Block is just as simple as TurboTax and comes with the same guarantees. However, the price of using H&R Block is slightly lower, and there are local branches all over the U.S. that can help you in person. H&R Block software for self-employed business owners starts at $84.95 for federal filing and $36.99 for the state.

These are a few features that come with H&R Block:

  • The mobile app lets you upload tax documents and track your filing status
  • Ease of use with simple step-by-step guidelines
  • Unlimited on-demand chat or video support (with specific plans)
  • Can speak to a tax expert (for an additional fee) with an average of 10 years of tax experience
  • More than 11,000 physical locations
  • Maximum refund guarantee or H&R Block will refund your money
  • Free audit support and assistance if you receive an IRS notice
  • 100% accuracy, or you’ll be reimbursed for any penalties or interest up to $10,000
  • Block Advisor package includes year-round tax support

The downsides of H&R Block aren’t too severe. The live support feature will cost you a little extra, and the app has fewer abilities than the desktop version. Also, there are no DIY options for a corporation or multiple-member LLC filings.



Learn MoreOn FreeTaxUSA’s Website

The key word in FreeTaxUSA is free. You can’t beat free, and that’s why FreeTaxUSA has made its way on this list. You’ll need to keep in mind that you’re going to get what you pay for. There’s no way to expect free software to compete with packages that cost hundreds of dollars. However, the features of FreeTaxUSA are more than you’ll need to stay on top of your tax forms. Even if you wanted to upgrade to a paid version, the Deluxe Edition only costs $6.99.

 Here is a list of the features that come with FreeTaxUSA:

  • Mobile app
  • Federal filing is free to use
  • Audit Defense (with a paid plan) gives you a representative if the IRS audits your return 
  • Maximum refund guarantee or FreeTaxUSA will refund your money and give you a coupon for a free amended tax return
  • 100% accuracy guarantee, or you’ll be reimbursed for any penalties or interest charges

The downsides of FreeTaxUSA boil down to a matter of convenience. You’ll have to manually enter your W-2 data as it can’t be imported. Another issue is that customer support, live chat, and audit defense are only available with the paid plan. However, it’s only $6.99, so it’s nothing worth being upset with. The last thing to mention is that you will have to pay state taxes. Federal filing is free, but state filing costs you $12.95.



Learn MoreOn TaxAct’s Website

TaxAct offers straightforward, affordable, and easy-to-use software. It has nothing too spectacular, but you can’t be upset with what you’ll get. TaxAct helps you file a single federal return for $64.95; a state filing will cost an additional $44.95. These rates include filings for larger businesses such as S-Corps or C-Corps.

These are a few features of using TaxAct software:

  • Mobile app
  • Reimbursed up to $100,000 if the software caused any penalties or interest from the IRS or state 
  • Integration with previous tax data and accounting software
  • Can file for self-employed, partnerships, S corp, and C corp
  • One-on-one support from a real tax expert (for an extra cost)
  • Maximum refund and 100% accuracy guarantee or TaxAct will refund your plan fees and pay the difference in your refund
  • Unlimited free tax and technical support by phone and email
  • Up to $100,000 in legal or audit costs 
  • Discounts are available for bundling personal and business taxes

The biggest downside for TaxAct is that the expert help will cost you extra money. There is also an issue with state forms, and you might not be able to file them electronically. You’ll be able to use the software to prepare them but not have to fill them in by hand and physically mail them in.



Learn MoreOn TurboTax’s Website

TurboTax is one of the most popular online tax filing software companies today. The software helps to make the process of filing your taxes much easier and walks you through every step. The price is steep as the TurboTax Self Employed option starts at $119 for filing your federal taxes and $49 for state taxes. TurboTax Business can help members of a partnership, S-Corp, or C-Corp, which starts at $170 for federal and $55 for the state.

Here are some of the benefits that you’ll receive from using TurboTax:

  • Mobile app
  • Step-by-step guidelines with an easy-to-follow Q&A format
  • On-demand advice and a final review from a tax expert or CPA (with specific plans)
  • A tax expert helps prepare, sign, and file your return
  • Accuracy and maximum refund are guaranteed
  • Free audit support and assistance if you receive an IRS notice
  • Integrates easily with Quickbooks
  • Create unlimited W-2s and 1099s for employees

The most noticeable downside of TurboTax is that the price is a little high. Especially if you’re looking to access the live support feature. Another issue is that the 1065 and 1120S forms are only available on the desktop version of TurboTax.

What types of taxes does a small business pay?

Not every business is going to be taxed at the same rate. There are several factors involved that will determine the percentage of taxes that are owed. For example, a sole proprietor might only pay a 13% federal tax rate while S-corporations pay 27%. The taxes for a partnership are around 24%, but they’re not required to file an annual income tax return. The individuals involved would have to file an information return instead and be taxed accordingly. The tax rate is often much lower for a sole proprietorship because the risk for the individual is much greater.

Location is another factor that can change the amount of taxes you pay. In Wyoming, there are no income taxes collected for corporations. You’ll pay between 6.5% and 11.5% in New Jersey in corporate income taxes. You’ll be paying federal taxes in both states regardless of how much you might be paying in state taxes. However, you can imagine how much a business might save by being in Wyoming instead of New Jersey.

While the percentage of taxes can vary, the type of tax will not. Here are a few examples of the types of taxes that your business might pay each year:

  • Income Tax. Federal income taxes are pay-as-you-go taxes. You’ll need to pay the tax when you earn or receive income throughout the year. Income taxes are usually paid either through withholding or through estimated taxes. If the taxes aren’t made throughout the year, it could result in a penalty being applied when the return is filed. 
  • Self-employment Tax. Sole proprietors and anyone who works for themselves must pay a self-employment tax. There are some exceptions, but if your net earnings from self-employment were $400 or more in a year, you’d be required to pay self-employment taxes. These taxes are one of the reasons why a sole proprietor pays a much lower income tax rate than other business structures. The money from this tax is used to fund the government-mandated Social Security and Medicare programs. 
  • Employment Tax. A business that has employees will be subjugated to specific tax responsibilities. For example, federal income tax withholding, Social Security and Medicare taxes, and federal unemployment taxes must all be paid. The burden of filing these forms will ultimately fall on you and could result in a fine or criminal proceeding if not handled correctly. 
  • Excise Tax. These taxes can vary significantly depending on the type of business that you operate. You’ll need to pay excise taxes if you manufacture or sell certain products, run a certain kind of business, receive payments for certain services, or use various equipment, products, or facilities. If you meet these qualifications, then you’ll need to pay several taxes, including environmental taxes, fuel taxes, retail taxes, manufacturer’s taxes, and communications taxes.


Use tax software to help you with your taxes

Nobody likes paying taxes. It’s often the most stressful time of the year and rarely comes with good news. There are a few things that you can do to help lower your taxes and save some money during your lifetime. However, it will always sting at least a little bit anytime you have to pay taxes.

Since you can’t get out of paying taxes, the least you can do is make sure that you avoid any problems. One of the tax software options listed above can help you prepare your taxes more efficiently and possibly save you money. 

There isn’t much benefit to trying to figure out taxes by yourself. The tax code is too complicated and constantly changing. Let the experts help you to focus on what matters: running a successful business. 

Information provided on Entrepreneur Guide is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, we do not recommend or advise individuals to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results

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