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The federal tax code is approximately 200 times larger now than it was in 1913, which has resulted in a complex and confusing tax code. And while compliance with the tax code is not optional, tax software solutions cater to very different tax filers when it comes to easy-of-use, support, income-level, navigability and a host of other factors.
What Is The Best Tax Software?
Below is a list of criteria to consider when selecting a tax software vendor.
Did you know that, depending on your income, it’s possible to avoid all tax software and file free directly with the IRS via their Free File: Do Your Federal Taxes for Free program?
If you ever read Rich Dad, Poor Dad by Robert Kiyosaki, you’ll know income earners fall into 4 categories:
- Employees
- Investors
- Business owners
- Self-employed
As an employee, the category most tax filers fall into, the good news is your tax filing may be relatively straightforward: simply report your W-2 wage income and perhaps interest on savings accounts.
As a self-employed tax filer or perhaps someone who works in the service economy or indeed someone who supplements their employee income with additional income as a contractor, a more robust software solution may be needed. This is especially true for couples with kids, homeowners, charity donors, philanthropists and rental property owners, who can take advantage of tax deductions and tax credits. Commensurately, the additional software capability to account for these circumstances will reflect in the cost of the tax software.
User experience and easy navigability of tax software is what tax filers want above all so that special tax situations are as easily handled by the tax software as are the simple cases. No matter how powerful the tax software, certain tax filers may still prefer and need the expertise of a professional tax preparer. For example, an options trader owning a particular options spread may discover that theoretically the same combination spread can be categorized as two different options strategies which are treated differently for tax purposes by the IRS. In such situations, consulting an expert is preferable.
What Is The Easiest Tax Software To Use?
We analyzed well-known tax software solutions to identify the easiest tax software to use that was also affordable.
Head and shoulders above its competitors stands TurboTax when it comes to user experience and an intuitive step-by-step interface for the DIY tax filer.
Data entry is clear and simple. Importing data is equally straightforward via TurboTax. The questions you receive are not quite as powerful as an artificial intelligence robot guiding you through the answer sections, but it may feel like it at times. And if you do get stuck, there’s always the option to pay a premium to access SmartLook, the video system that connects you to a live, expert tax preparer.
TurboTax is well-known, trusted brand and as such it commands a pricing premium often in excess of $100. Beware that in the event of an audit, TurboTax does not allow you to purchase support products after the fact. Much like insurance, it must be purchased beforehand. And unlike H&R Block, TurboTax doesn’t have a physical location where you can speak to a tax preparer live.
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What Is The Cheapest Tax Software?
These tax software vendors offer a low-cost way to file taxes.
The IRS permits wage earners with less than $64,000 of adjusted gross income to file for free via their Free File system. Income-earners above that level may prefer any one of the following low-cost tax software solutions.
FREETAXUSA has been in business since 2001 and claims to have filed tens of millions of returns. FREETAXUSA has a free Federal filing version but filing State returns costs $12.95.
Their free version doesn’t have lots of bells and whistles and isn’t as robust as some of the higher cost competitors but it gets the job done nevertheless, supporting the following forms:
- 1040, 1040EZ, 1040A, 1040Z
- Schedule A, B, C, D, E, EIC, F, and more
- Form 1099-A, 1099-B, 1099-C, 1099-DIV, and more
- Form W-2
- Unemployment
- Self-employment income
FREETAXUSA offers a paid version of their software, called Deluxe, for just $6.99 which provides priority support, live chat, audit assistance, and unlimited amended returns. If you filed previously with competitors, such as TurboTax and H&R Block, you can easily upload prior years’ tax returns.
The largest drawback of FREETAXUSA is their lack of audit support and limited customer support for their free version but for an additional $6.99 those features are readily available.
TaxSlayer is known for its great software interface. Unlike some software that restricts user progress when a piece of data is missing, TaxSlayer allows a user progress and revisit missing data entries at a later stage. They also have a 100% guarantee, promising to reimburse customers for any penalties or interest charges by State or Federal government for mistakes stemming from the tax software.
On its premium edition (costing an additional $28.99), TaxSlayer also provides users a gauge of how likely they are to be audited but they won’t offer support to customers in the event of an audit. Plus the TaxSlayer mobile app facilitates customers photographing a W-2 as opposed to entering the data themselves.
Individuals and businesses with straightforward tax situations should find TaxSlayer sufficient but freelancers needing Schedule C assistance or tax filers seeking help with deductions may find TaxSlayer falls short of the mark in supporting them.
TaxAct allows users file 1040EZ/A Federal and State tax forms free of charge. Beyond its attractive low-cost feature, TaxAct makes it easy to import returns from competitors such as TurboTax and H&R Block.
For stock investors, TaxAct has an easy-to-use spreadsheet that allows for manual input of purchase and sale dates, sales proceeds, gains/losses and other relevant information.
Free email and phone support is also available and an option exists to purchase audit support services from a partner company.
TaxAct has straightforward capability for filers with simple tax situations but if you’ve got complex deductions or an overall complex tax situation, other more powerful tax software solutions may be preferred.
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Which Tax Software Has Most Support?
The tax software solutions below have an edge in customer support.
- 1040EZ
- 1040A
- 1040 with Schedule A
It’s not common to find software providers who file these forms at no cost, but H&R Block knows well that it’s rare for tax filers not to need the support of a tax preparer. They have an extensive network of approximately 12,000 physical locations nationally, allowing customers to easily get in contact with qualified tax preparers. It is this higher degree of customer support that commands a commensurately higher fee for the paid version of H&R Block’s tax service.
A nice feature of H&R Block’s service is that you are not left with the choice of either filing alone cheaply or hiring a tax preparer at a substantially higher cost. H&R Block offers an in-between offering that allows you to submit taxes for review by a qualified tax preparer before filing.
>> Discover How To Find Best Tax Preparer
>> What Is Non-taxable Income?
>> What You Need To Know About The Alternative Minimum Tax
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