The average cost for a tax professional to prepare a basic federal and state return was $129 in 2010. And if your taxes were a little more complex, expect to pay much more. And that’s why approximately 31% of all American households have found a cheaper solution by filing their taxes online. With the number of e-filers growing at a 15% clip since 2005, Americans have become savvy when it comes to filing their taxes. Perhaps it’s time you joined them.
But choosing the right tax software is not an easy decision. TuboTax, TaxAct, and H&R Block at Home each have something different to offer, which makes it difficult to choose which is right for you. So we’re going to stress test each of the major online tax preparation services and tell you which we think is best and why. You won’t want to miss this.
TaxAct is owned by Second Story Software and has been around for a little more than a decade. Over that time, it has grown to the number 2 online tax service, and millions flock to it like moths to a flame. What makes it so attractive? Why its price point of course.
Compared to TurboTax and H&R Block at Home, TaxAct is cheap. Heck compared to a cup of coffee, TaxAct is cheap. But what you may not know is that this software is geared to those who have very simple tax situations. It’s perfect for a college student, a taxpayer who uses the standard deduction, or your paperboy. For these filers, TaxAct works as advertised, and it works cheap.
But the fact is, you won’t find any bells and whistles with TaxAct. The interface is just okay, the functionality is inferior to peers, and the tutorial and constant offers to upgrade are annoying. Oh, and if your tax situation is a bit complex, this software might cause you to miss stuff, which will cost you money. At that point, the price of the software is no longer a consideration and whatever you end up paying is too much.
The most techy thing about TaxAct is the aggravating tutorial, which stops you at various points of your return to remind you how great the software is. If you’re a landlord with multiple rental incomes, a family with 1000 itemized deductions, or a self-employed guru who needs to depreciate space within your home, TaxAct may not be right for you. While the software can handle these types of situations, you’ll need some luck to get all the credits and deductions you deserve.
With a free federal e-file, a $9.95 upgrade to the deluxe version, and $14.95 to file a state return, you will love the price. Simply put, TaxAct is the most competitively priced product out there, and if you usually file a 1040EZ Form, this is a cost-effective way to go.
TaxAct also sports a couple of cool features. It allows you to enter itemized deductions but will automatically use your standard deduction if it’s larger. And depending on your situation, the software reminds you that it may be time to start paying back your first-time homebuyer credit. So there are some useful, positive things driving this program.
When you first open the link to your return, you’re greeted with a sales pitch in the guise of a woman giving a tutorial. At this point you may be thinking, why is she trying to sell me? I’m already using the thing. Now before you start punching in numbers, you’re reminded that you need to find all the credits and deductions you deserve. To do that you’ll need to upgrade to the deluxe version, which costs $9.95. Hey, how about making sure I get all my deductions without making me upgrade.
Now the life event section comes up and again so does the tutorial. And maybe it’s inserted here to distract you from this debacle. If you use the free version, TaxAct allows you access to 1 life event of your choice (Those are their words not mine.) But if you upgrade to the deluxe version, you will have access to an unlimited number of life events. So if you had a baby and bought a house, you better upgrade, else you’re SOL.
No other tax preparation service does this to its customers. If this is the way developers are going to play it, wouldn’t it be better to just get rid of the free product, charge $9.95, and give you everything you need to get your taxes done right?
Did I mention the functionality problems? In the W-2 section on Line 15, you have to be ultra careful when you enter your employer ID number. And that’s because the dropdown box from the previous line makes it difficult to see. And when you’re done with the W-2 section, don’t bother searching for a continue button or an arrow or some other obvious prompt. You have to hit the close form button and hope the program saved all your information. You won’t need to take this leap of faith with any of the other major tax software providers.
As a taxpayer with complex finances, I have little confidence that TaxAct is going to ensure I get all the credits and deductions I deserve. The program just isn’t thorough enough. But if stuff was simple and I just needed to fill out a 1040EZ, then the software would work just fine.
The problem is TaxAct also markets itself as a solution for everyone and that’s where it fails. It’s simply not detailed enough to meet the needs of the entire population. Heck, if you had some time and an Excel spreadsheet, you may be able to create a comparable product to TaxAct. So for some, TaxAct is just what you need and presents a great value, for others, it won’t do the job.
How do H&R Block at Home and TurboTax compare? Check out their reviews before breezing through our final grudge match to see who won the tax software showdown!