Prepare Your Own Taxes the Right Way

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It’s that time of year again where we need to reconcile the previous year’s income for the government. The task can be daunting, but with armies of tax professionals and online software, many people can tackle their tax return with few issues.

The trick is finding the right tax software when you plan on preparing your own tax return. The most popular online packages are dummied down versions of better tax software programs. The Q&A required by most online programs can become daunting (and time consuming) if you have any tax knowledge at all. The biggest problem is finding tax software that is professional grade that offers just enough help to not be invasive.

I want to introduce you to an online tax program I think is superior to other online software: Drake Software. The banner below is a direct link to the software for individual users. It was featured last year on Mr. Money Mustache. It also happens to be the same tax software I use in my office.

Over 50,000 tax professionals use Drake software to file over 26 million tax returns.  My office was one of the earliest adopters of the Drake interface (one of the first 200 if my ID number is any indication).

Back in the late 1980s I sought out a professional software package that was not only robust, but offered economical e-filing. Back in those days it was common for software to charge $35 or more just to e-file. Drake was an industry leader, charging only $1 per e-filed return. My office could offer free e-filing before anyone else due to Drake and their powerful software platform.

Time has only made this software better. Of course, my office still e-files for free, but it is so much more. Drake branched out into other areas of the accounting office. They also offered accounting firms like mine an opportunity to provide an alternative in the DIY tax preparation segment.

What I liked from the start was that Drake incorporated the entire professional grade platform in their online version for people preparing their own return. No other online software offers such a robust program to the general public, in my opinion. They market the program under the 1040.com name.

Advantages

There are two major advantages to this software in my opinion.

  • Drake Software has the familiar Q&A of other online tax software, but is not nearly as burdensome as the other DIY programs. You can bypass most of the Q&A to enter information directly on the tax return, saving time. Plus, when the return is calculated, the software gives you two types of diagnostics. The first addresses issues which must be corrected on the return before filing. The second is a list of reminders and suggestions based on the information you entered on your return. These two powerful tools allow you to prepare your tax return faster and without error. You see what tax professionals see.
  • The cost of the 1040 preparation is among the lowest in the industry. Couple that with the professional grade software provided and I feel it is the best value in the market today.

Disadvantages

There is one disadvantage you should be aware of. The only way Drake can make it easier for you to prepare your return in less time is to waste less time is mindless Q&A. The Drake platform has to assume you have at least a basic understanding of tax preparation and filing rules. Drake helps a lot with their Q&A, but falls short if you have no understanding of the tax preparation process. In my opinion, you need to hire a tax professional if you can’t use the online Drake program, but if you want to DIY, Drake will make it easy to prepare the return faster.

I think most people understand what a W-2 is and want to plug the numbers in as fast as they can along with their other numbers so they can finish as quickly as possible. Entering data quickly and using the software generated diagnostic pages makes it easy to handle most tax situations with only basic tax knowledge.

Fees

It’s easy to brag, “We are cheaper.” Here is the fee structure for Drake.

1040EZ Free ($9.95 per State)
1040A $19.95 ($14.95 per State)
1040 $39.95 ($19.95 per State)
Extensions $14.95

There is no fee until you either print or e-file the return.

Also, Drake offers all the bank products stuff, too. I don’t have that pricing available and never recommend spending money on tax bank products when direct deposit is so fast.




Disclosure

I am biased for a couple of reasons. First, I use the software in my office and like the way it works. Second, I get paid a percentage of the fee you pay to Drake Software. The DIY online tax program is the largest source of income for this blog. It pays the bills, keeps the lights on, and gives me a reason to keep writing. I think it is only fair to let you know up front my relationship with Drake Software. I would not recommend the program if I did not believe in it; I wouldn’t use it in my office either.

If you want to support this blog, be sure to start with the link on this page. If you don’t I will not receive any income. Once you have opened the file there is no problem. You might also want to bookmark this page for future years when you file. For some reason I keep getting hungry every year so I really appreciate return customers.

Regular Programming

Now that I got the obligatory promotional piece out of the way I can get back to writing stuff I prefer writing. I have quite a few ideas in the queue. I also received an email a few days ago with a question I think many people have on their mind. It will probably be a long post, but necessary with all the information I need to provide. Fingers crossed I can get it done over the upcoming weekend. So no one hurts themselves wondering what this grand topic is, I will whet your appetite.

Nick H asked my opinion on tax-advantaged accounts versus regular accounts (non-qualified or non-tax-advantaged accounts.) Specifically, he wanted to know if it is always a good idea to max out tax advantaged accounts before investing in regular accounts. You would think the answer is simple, but it isn’t. The answer changes depending on your situation. The answer also requires digging into tax loss harvesting issues—Betterment, for example. Sometimes you want to tax loss harvest; sometimes you want to increase your basis instead. I am so excited I am salivating just thinking about writing that darn post. There are so many powerful ideas I want to share that I know you will find valuable—and profitable—in your journey to financial independence and beyond.

Thank you for supporting this blog and my work. It is appreciated more than you can imagine.




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Keith Schroeder

15 Comments

  1. MilitaryFIRE on January 25, 2017 at 8:03 am

    I’m excited to get started with 1040.com. I signed up late last year on your rec, and it appears this year’s filing software if finally live!

    • Keith Schroeder on January 25, 2017 at 8:07 am

      Thank you for the support, MilitaryFIRE. The IRS went live January 23rd so my guys had to wait too.

    • MilitaryFIRE on January 25, 2017 at 9:43 am

      So far the only issue I’ve run into is the inability to file State- Married/Separate, if filing Federal- Married/Joint. (military family with 2 different state residences, Spousal SCRA not applicable…yet). Just had to create a separate account for Spouse, reenter basic info. Cant e-file, only snail mail. Not to shabby!

  2. Mitchell Atlas on January 25, 2017 at 11:49 am

    For those whose AGI is below $64,000, you can get free federal and state tax filing using the IRS-approved free file software offers: https://apps.irs.gov/app/freeFile/jsp/index.jsp?ck

    • Keith Schroeder on January 25, 2017 at 12:49 pm

      Much of the free filing is built into the 1040 platform. Depending where you fall in tax terms determines if you qualify for free file. With 1040 you can enjoy free file at any income level if you file 1040-EZ.

  3. Jerry Gordon on January 25, 2017 at 12:29 pm

    I would love to support you..I have used the H&R Block program for many years. Will it import my info? I have an investment property and would have to retype all the depreciation information etc

    • Keith Schroeder on January 25, 2017 at 12:51 pm

      Sorry, Jerry. There is no import feature.

  4. John McCarthy on January 25, 2017 at 7:38 pm

    Using Drake this season for the first time. So far, I have been really happy with it. I have the hosted version so I can have my subcontractors work from wherever. Do you also use the CWU tool?

    • Keith Schroeder on January 25, 2017 at 7:49 pm

      I used to use Client Write-Up, but not for a long time. My office supports QuickBooks only.

  5. Todd on January 26, 2017 at 11:27 am

    You’ve got one referral from me. I’m happy to try an alternative to TurboTax, particularly on your recommendation. Just curious though – does 1040.com charge extra if you need to include additional forms (such as 8606, 8889 or 1116, for example)? I don’t want to get all of my information entered and then find there’s a upcharge for something simple.

    (Using TurboTax over the years has put me on perennial watch for scammy upcharges. Thought in fairness to Intuit, their mint.com software is a step up in terms of customer friendliness.)

    • Keith Schroeder on January 26, 2017 at 12:18 pm

      The fee is straight forward as listed in the post above. The only additional fee would come from bank products, which I never recommend.Be aware, Todd, the fee listed is for the federal tax return only; the state return fee is listed to the right of the federal fee and is in addition to the federal prep fee.

  6. Jason White on January 26, 2017 at 7:20 pm

    I tried it out. It is very easy to use. The filling out of information was great, easy and straightforward. It is lacking in the EITC area. I inputed info that would qualify for it, but for some reason it didn’t show up. There was no way to add it, and I didn’t receive any error messages. I bought H&R Block for ~$25 so I think the pricing is a bit on the high side. For me it would be $60 on Drake and then I would have to pay for each family/friend that I help out. With Block I can efile 5 feds for free.

  7. scott on February 6, 2017 at 10:14 pm

    Keith, I am happy to report that based on your recommendation I purchased Drake software for 2016 (pay per return version). I am starting with my return and those of a few family members. Hopefully by the end of the month I’ll be ready to seek out my first real customers (scary thought). I hope to slowly build a small seasonal tax business but I don’t think I could ever manage an entire firm like you do.

    • Keith Schroeder on February 8, 2017 at 3:00 pm

      Let me know how it works. I should tell Drake they owe me a commission.

  8. […] powered by Drake Software, the same company one of my favorite bloggers, The Wealthy Accountant recommends for preparing your taxes. They charge a 1.98% credit card convenience fee which is actually pretty reasonable given that you […]

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