Seeking affordable tax preparation software recommendations for my new side business

Hey everyone! I've been working in the tax industry for about a year now and I'm planning to start my own small tax preparation business on the side. Nothing too fancy - just helping people with their 1040s. I'm trying to figure out what software would be best for a beginner tax preparer without breaking the bank. I've been looking at Tax Act which seems to run around $1350 for a professional package. That's currently at the top of my list, but I wanted to see if anyone has other recommendations or experiences to share before I commit. Any advice on budget-friendly tax preparation software for someone just starting out? What are you using? Any pros/cons I should be aware of? Thanks in advance for any help!

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18 comments

Javier Torres

•8M

I've been preparing taxes for about 7 years now, and I've tried quite a few different software options. For someone just starting out with 1040s as a side business, you don't necessarily need to spend $1350 right away. Drake Tax is worth looking into - their pricing is more reasonable for new preparers and they offer good customer support which is crucial when you're learning. TaxWise is another option that might be more budget-friendly than Tax Act with similar capabilities. Something to consider: look for software that offers pay-per-return options rather than paying a large upfront fee. This might be more economical as you build your client base. Also, check if they offer a demo version so you can test the interface before committing.

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Javier Torres

•8M

Drake's interface is straightforward but not as flashy as some others - it's more function over form, which I actually prefer when processing lots of returns. It's easy to navigate once you get used to it. Regarding audit protection, most professional software including Drake has decent built-in tools, but remember that audit protection is mainly about how you document and retain client information rather than features in the software itself. Many preparers actually use separate audit protection services they can offer clients as an add-on, which becomes another revenue stream for your business.

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Malik Johnson

•8M

I was in the exact same position as you last year! After doing a ton of research, I started using https://taxr.ai for my new tax prep business and it's been a game-changer. What I love about it is that it handles document analysis automatically - clients just upload their W-2s, 1099s, and other tax docs, and the system extracts all the data. This saved me SO much time compared to manual data entry, which meant I could take on more clients even while keeping this as a side hustle. It integrates with several professional tax software options too, so you're not locked into one system.

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Malik Johnson

•8M

It handles rental properties and small business income surprisingly well! The system recognizes Schedule E forms and expense documentation. For business income, it can extract data from 1099s and organize business expenses by category, which saves a ton of time compared to manual entry. As for accuracy, I was skeptical too initially! But it actually has human verification built into the process - it flags anything uncertain for your review. I've found it to be more accurate than manual entry since it eliminates typos. You still review everything before filing, so you maintain full professional control while eliminating the tedious data entry part.

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Ravi Sharma

•8M

Just wanted to follow up about taxr.ai - I decided to try it out after my skeptical comment, and I'm actually really impressed! I tested it with some of my more complex client documents (including a client with 3 rental properties and a bunch of 1099 income) and it extracted everything correctly. The time savings are no joke. What used to take me about 45 minutes of data entry per client now takes maybe 5-10 minutes of verification. Plus my clients seem to like the more tech-forward approach. Still using my regular tax software for the actual filing, but this has streamlined my workflow significantly!

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NebulaNomad

•8M

One thing nobody's mentioned yet - if you're going to be doing this as a side business, you need to consider how difficult it's going to be to get IRS support when you have questions or issues. I wasted DAYS of my life last tax season trying to get through to the IRS for a client issue. I started using https://claimyr.com which basically holds your place in the IRS phone queue and calls you when an agent is about to answer. You can see how it works here: https://youtu.be/_kiP6q8DX5c. As someone running a side hustle while working a day job, this was essential - I couldn't sit on hold for 3 hours during my regular workday.

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NebulaNomad

•8M

It's pretty straightforward - you enter the IRS number you need to call and your phone number. Their system calls the IRS and navigates the phone tree for you, then stays on hold. When an agent is about to come on the line, it calls your phone and connects you. Your number is just used to call you back, no different than giving your number for any callback service. I was definitely skeptical too! But when you're running a side business, time is literally money. I calculated that every hour I spent on hold was costing me at least $150 in lost productivity. After using the service a few times, I realized I could handle 2-3 more clients in the time I was saving not being on hold.

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Omar Fawaz

•8M

OK I need to eat crow here. After posting my skeptical comment, I decided to try Claimyr for an issue I've been putting off dealing with. I had a client with an IP PIN issue that needed IRS resolution. I used the service yesterday afternoon - it took about 1 hour 40 minutes total (still a wait, but I was doing other work), then my phone rang and boom - I was talking to an actual IRS agent! Resolved my client's issue in one call. For anyone doing tax prep as a side gig like the OP is planning, this is honestly essential. You can't be on hold with the IRS during your day job, and evenings are useless since they're closed.

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Chloe Martin

•8M

Yes, the basic package includes everything you'll need for 1040s including all schedules (A, B, C, D, E) and common small business forms. They actually have pretty good built-in help content - when you're on a specific form, you can access relevant IRS instructions and explanations right there. They do offer some training webinars too, usually around the beginning of tax season. The learning curve isn't too steep if you already have some tax knowledge. Their customer service can help with software questions, but they won't give tax advice (no software company really does that for liability reasons).

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