Best Tax Software for Freelancers & Small Businesses

Overview: Navigating Taxes as a Freelancer or Small Business

As a freelancer or small business owner, taxes can feel like a complicated maze. You have unique income streams, varying expenses, and the responsibility to handle everything from deductions to estimated tax payments. The challenge is real, but the right tax software can make it manageable.

The Unique Tax Challenges Faced by Freelancers & Small Businesses

When you’re your own boss, taxes aren’t automatically taken out of your paycheck. You have to manage quarterly estimated payments, keep track of business expenses, and understand how your business structure impacts your taxes. Unlike traditional employees, freelancers and small business owners deal with forms like Schedule C and may need to pay self-employment tax. Missing deadlines or overlooking deductions can be costly, so it’s crucial to stay organized and informed.

Why Choosing the Right Tax Software Matters (Time Savings, Accuracy, Deductions)

The right tax software isn’t just about filing; it’s about saving you time and stress. A good program will help you:

• Capture all your deductions: From home office expenses to mileage, software can help you find and claim deductions you might have missed.
• Ensure accuracy: Automated calculations and error-checking features help prevent costly mistakes that could trigger an IRS audit.
• Handle complexity: Whether you’re a sole proprietor or an LLC, specialized software can guide you through the specific forms and rules you need to follow.

Briefly introduce the software options to be covered (TurboTax, H&R Block, TaxAct, FreeTaxUSA, etc.)

We’ll be taking a close look at popular tax software options tailored to freelancers and small businesses, including TurboTax Self-Employed, H&R Block Self-Employed, TaxAct Self-Employed, and FreeTaxUSA. Each has its strengths and pricing tiers, and we’ll help you find the best fit for your needs.

Understanding Your Tax Needs

Before diving into software options, it’s important to understand how your business structure and income sources impact your taxes. Here’s what you need to know:

Business Structure (Sole Proprietorship, LLC, S-Corp, C-Corp) – how it impacts tax filing

Your business structure determines how you file taxes and what forms you’ll need:

• Sole Proprietorship: Simplest structure. Income and expenses are reported on Schedule C, attached to your personal tax return (Form 1040). You’ll pay self-employment tax (Social Security and Medicare).
• LLC (Limited Liability Company): Defaults to being taxed as a sole proprietorship (if single-member) or partnership (if multi-member). However, you can elect to be taxed as an S-Corp or C-Corp.
• S-Corp: Requires filing Form 1120S and K-1 forms for shareholders. Owners pay themselves a salary and may receive dividends, potentially saving on self-employment tax.
• C-Corp: Files Form 1120. The corporation pays taxes on profits, and shareholders pay taxes on dividends (“double taxation”).

For more general tax information, check out our taxes page.

Income Sources (1099-NEC, W-2, Self-Employment Income)

As a freelancer or small business owner, your income might come from various sources:

• 1099-NEC: Reports non-employee compensation (e.g., freelance work).
• W-2: If you also have a traditional job, this reports your wages.
• Self-Employment Income: Money earned from your business activities, reported on Schedule C.

You’ll need to account for all income sources when filing your taxes.

Tax Filing Frequency (Annual, Quarterly)

Unlike employees with taxes withheld, freelancers and small business owners typically need to make estimated tax payments quarterly to avoid penalties. Our estimated tax payments guide explains how to calculate and pay these.

Top Tax Software for Freelancers & Small Businesses: Detailed Reviews

Now, let’s dive into detailed reviews of the top tax software options for freelancers and small businesses. We’ll cover pros, cons, features, pricing, and more.

TurboTax Self-Employed

Pros:

• User-friendly interface with step-by-step guidance.
• Deduction finder helps maximize write-offs.
• Integrates with QuickBooks for easy expense tracking.
• Includes audit support and one-on-one help with a tax expert.

Cons:

• Pricier than some competitors.
• Add-ons for state filing and audit defense can increase the cost.

Features:

• Schedule C support.
• Calculates quarterly estimated tax payments.
• Deduction finder with industry-specific suggestions.
• Free version for simple returns (but not suitable for self-employed).

Pricing Tiers & Value:

• Basic Self-Employed: ~$120 (federal), +$50 (state).
• Premium: Adds audit defense and more.
• Live: Includes access to a CPA or EA.

User Interface & Ease of Use: TurboTax is known for its intuitive design and clear explanations. The interview-style questions make it easy for beginners.

Customer Support Options: Email, phone, and live chat support. Premium plans include direct access to tax professionals.

Example: Sarah, a freelance graphic designer, used TurboTax Self-Employed to track her expenses and maximize her home office deduction. The software helped her identify $2,000 in additional deductions, reducing her tax bill.

H&R Block Self-Employed

Pros:

• Comprehensive tax advice tailored to self-employed users.
• Option to get help from a tax pro.
• Includes audit support.
• More affordable than TurboTax.

Cons:

• Interface is less polished than TurboTax.
• Some users find the navigation less intuitive.

Features:

• Schedule C and other self-employed forms.
• Industry-specific deduction finder.
• Calculates quarterly estimated taxes.
• Prior-year import.

Pricing Tiers & Value:

• Self-Employed Online: ~$115 (federal), +$50 (state).
• Premium: Adds in-person audit support and priority phone assistance.

User Interface & Ease of Use: H&R Block uses an interview-style format, but some users find it less streamlined than TurboTax. It’s still accessible for most users.

Customer Support Options: Email, phone, and live chat. Premium users get priority support and access to tax professionals.

Comparison table: TurboTax vs. H&R Block

TaxAct Self-Employed

Pros:

• Affordable compared to TurboTax and H&R Block.
• Detailed guidance for self-employed filers.
• Imports data from other tax software.
• Includes audit defense.

Cons:

• Interface is less modern than competitors.
• Customer support is not as robust.

Features:

• Schedule C support.
• Business expense tracking.
• Calculates estimated taxes.
• Prior-year import from TurboTax, H&R Block, etc.

Pricing Tiers & Value:

• Self-Employed: ~$85 (federal), +$50 (state).
• Premium: Adds phone support and audit defense.

User Interface & Ease of Use: TaxAct is straightforward but lacks some of the polish of TurboTax. It’s still functional and guides you through the process.

Customer Support Options: Email and phone (premium only). No live chat.

FreeTaxUSA

Pros:

• Free federal filing, even for self-employed.
• State filing is affordable ($15).
• Includes audit assistance.
• No upsells or hidden fees.

Cons:

• Interface is basic and less intuitive.
• No direct integration with accounting software.
• Limited customer support.

Features:

• Schedule C support.
• State filing at a flat rate.
• Prior-year import.
• Audit assistance (with paid deluxe version).

Pricing Tiers & Value:

• Free (federal), $15 (state).
• Deluxe: Adds audit assistance and priority support for ~$7.

User Interface & Ease of Use: The interface is functional but not as user-friendly as TurboTax. It’s best for those comfortable with tax forms.

Customer Support Options: Email support. Deluxe users get priority support.

Other Options (briefly mention): TaxSlayer, Zoho Books (integrated accounting & tax)

TaxSlayer: Affordable option (~$50 for self-employed), but less robust than competitors. Good for simple returns.

Zoho Books: Combines accounting and tax features, making it a good choice for small businesses already using Zoho for bookkeeping. Tax filing is integrated, but not as specialized for complex returns.

Key Features to Look For in Tax Software

When choosing tax software, consider these features to ensure it meets your needs:

Schedule C Support (For Sole Proprietorships)

Schedule C is where you report income and expenses as a sole proprietor. Ensure your software supports this form and guides you through each section.

Estimated Tax Payment Calculations

Look for software that calculates your estimated tax payments based on your income and deductions. This helps you avoid underpayment penalties. Learn more about estimated tax payments.

Deduction Tracking & Maximization

The best software will help you find every possible deduction, from home office expenses to business mileage. For a detailed guide on deductions, check out tax deductions for self-employed.

Integration with Accounting Software (QuickBooks, Xero)

If you use accounting software, integration can save time by automatically importing your financial data into your tax return.

Audit Support & Assistance

Look for software that offers audit defense or assistance in case the IRS has questions about your return.

Mobile App Availability

A mobile app lets you track expenses and manage your taxes on the go.

Security Features

Ensure the software uses encryption and other security measures to protect your sensitive financial data.

Pricing Considerations: Finding the Best Value

Pricing can vary widely. Here’s what to consider:

Free vs. Paid Options

Free options like FreeTaxUSA are great for simple returns, but paid software may offer more features and support.

State Tax Filing Fees

Most software charges extra for state filing, typically $40-$50 per state. FreeTaxUSA charges only $15.

Add-on Services (Audit Protection, Tax Advisor Access)

Some software offers add-ons like audit defense or access to tax professionals for an additional fee.

Comparison Table: Software Pricing (Free, Basic, Premium)

Frequently Asked Questions (FAQ)

Q: What is the difference between Schedule C and Form 1040?

A: Form 1040 is your individual tax return. Schedule C is an attachment to Form 1040 where you report business income and expenses as a sole proprietor. Learn more on our taxes page.

Q: How do I calculate estimated taxes?

A: Use your expected income and deductions to estimate your tax liability for the year, then divide by four to get quarterly payments. See our estimated tax payments guide for details.

Q: What are some common tax deductions for freelancers?

A: Common deductions include home office expenses, business supplies, travel, and health insurance premiums. Check out tax deductions for self-employed for a full list.

Q: What happens if I get audited by the IRS?

A: An audit is a review of your tax return for accuracy. If audited, you’ll need to provide documentation for your income and deductions. Some tax software offers audit support. For more help, visit irs audit help.

Q: Can I import data from my accounting software into tax software?

A: Some tax software, like TurboTax, integrates with accounting software (e.g., QuickBooks) to import data. Check compatibility before choosing.

Choosing the Right Software: A Quick Guide

Here’s a quick guide to help you choose:

• Simple Freelancer: FreeTaxUSA or TaxAct are affordable and cover the basics.
• Growing Small Business: TurboTax Self-Employed or H&R Block Self-Employed offer more features and support.
• Accounting Software Integration: Zoho Books if you already use their accounting platform.

Key Takeaways

• Choosing the right tax software can save you time and money.
• Consider your business structure and income sources when selecting software.
• Take advantage of available deductions to minimize your tax liability.
• Don’t be afraid to seek professional help if needed.
• Keep accurate records throughout the year to simplify tax filing.

Streamlining Your Tax Process

To make tax time easier, stay organized year-round:

• Keep Receipts and Invoices: Use cloud storage (like Google Drive or Dropbox) to store digital copies of receipts and invoices.
• Set Reminders for Estimated Tax Payments: Mark your calendar for quarterly deadlines to avoid penalties.
• Use Expense Tracking Tools: Apps like Expensify or QuickBooks Self-Employed can automatically track expenses and mileage.
• Stay Informed: Regularly check IRS updates or subscribe to tax newsletters to stay current on changes.

Taxes can be complex, but with the right tools and resources, you can navigate them confidently. Explore our related articles for more tax planning tips and strategies to keep your finances in check.