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You can choose the best partnership tax software by reviewing articles and testimonials about comparable products and picking one that is endorsed by the tax agencies in your jurisdiction, interfaces with your bookkeeping system, and allows you to complete your personal income taxes with information transferred from the partnership return. Most business tax software programs have a similar set of features. The ultimate decision will likely depend on your specific needs and which program's interface you like best.
Partnerships are pass-through tax entities. This means that the partnership does not pay income taxes as an entity. It passes its income and losses through to the partners, who include the amounts on their personal income tax returns. Each partner pays taxes on his distributed share of partnership net income at the individual tax rate. The return that a partnership submits to government agencies is an informational return only, prepared so that the government and the partners know the correct amounts that should be passed-through to individual returns.
Every year, business publications review and rate the tax software available for business owners who prepare their own business tax returns. To choose the best partnership tax software, you should first read some of these publications with an eye towards comparing features. Business tax software will typically enable you to prepare returns for any of the independent entity types, including corporations, limited liability companies, and partnerships. Since a partnership return must transfer information to your individual tax return, you should look for a program that allows you to complete both business and individual tax returns using shared information.
Tax agencies work with software developers so that the tax software made available to the public uses the most current versions of official tax agency forms. To choose the best partnership tax software, you should look for a program that supplies the official tax returns for every jurisdiction for which your have to pay taxes. For example, if the partnership is in the US and operates out of New York City in the state of New York, a partner should look for a program that is endorsed by the Internal Revenue Service (IRS) for the federal return and is able to prepare the New York state and New York City business returns.
Another important feature to look for when choosing partnership tax software is whether or not it will import information from your bookkeeping software. Many businesses use accounting software programs to keep track of revenue and expenses. The ability to transfer that information directly into a tax program makes the process of preparing returns more efficient. Without this compatibility, you have to complete the transfer by hand.
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