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Online tax prep software has gradually advanced over time; major progression has forged from just boxed or downloadable tax programs. Powerful web apps or even mobile apps, competing products from well-known software providers and even some lesser-known upstarts have kept innovation moving forward.
Products are easier to use and generally affordable, but not all tax software solutions are created equal. Read on to determine which software is best for you.
Quick Look: The Best Online Tax Software This Year
What is an Online Tax Prep Software?
In the past, filing your taxes often meant late nights spent surrounded by complicated IRS forms, piles of receipts and head-spinning financial documents. Online tax software has been with us for a while now, and it makes tax filing easier, faster, and if you value time as money, perhaps less expensive as well.
Though not as easy as handing everything over to an accountant, the best online tax software options provide an easy way to file your taxes accurately and often offer online assistance from tax professionals.
Most of the online tax software solutions offer tiered pricing. In many cases, the entry-level tier is free, which usually includes the Form 1040. If you need to itemize deductions or account for investment income, a tiered product offers the additional forms you’ll need.
Typically, tax filers who can use the 1040 enjoy the lowest pricing (or free filing) while more complicated returns, like those for homeowners, investment income/rental income or returns for self-employed tax filers with business deductions pay more for access.
Some online tax software providers still provide boxed or downloadable software, while others incentivize the use of a web app with discounted pricing when compared to the cost of installable software.
One common advantage of installable online tax software is that some providers allow multiple uses of the software, meaning you can use the same software again the following year with no additional purchase. Many of the top online tax software providers also provide a mobile app, which may be a good fit for tablet users or those with very basic taxes.
What to Look for in an Online Tax Software
Choosing an online tax software can seem like a daunting task. The goal of most tax filers is to submit an accurate return and to save as much money as possible in the process. Let’s face it: Taxes can be difficult to understand.
It’s Easy to Use and Understand
Even if the underlying tax concept is easy to understand, reading IRS guidance on how to calculate capital gains taxes or how to account for brokerage taxes is enough to make your eyes glaze over. An online tax software should be easy to use and provide a way to guide filers through the process with easy-to-understand prompts and guidance.
Affordability is another consideration. While many tax software solutions provide a good, better and best product tier, pricing for comparable functionality should be close to competitors and more affordable than utilizing an accountant to complete your taxes.
Also, consider your state taxes. State filing costs are in addition to federal filing cost and can range from $0 up to about $35 per state, depending on the package you choose.
It has Excellent Customer Support
Support is also essential. The answer to one question often leads to new questions. A comprehensive help center is needed at a minimum and, ideally, live support is just a click away — where questions can be asked and answered in plain English.
Software 1: TurboTax
TurboTax Software Overview
TurboTax has long been an online tax software leader. While not the least expensive option in tax software in our roundup, TurboTax may represent the best value, especially if you’re interested in time-saving features and if you own various types of assets, including stocks and homes.
If you’ve used TurboTax before, the software saves your history from prior years, which is helpful for carryovers and other calculations.
Self-employed tax filers will enjoy TurboTax’s Expense Finder, which can scan your bank account for business-related deductions that can lower your tax bill. TurboTax can even categorize and input the values it finds automatically.
Of course, as one of Intuit’s leading products, TurboTax can also import accounting data from QuickBooks if you choose TurboTax Business.
Personal tax versions of TurboTax can interface with Quicken, Intuit’s personal finance software.
TurboTax is often a better fit than some other options for stock investors or those with a more complicated tax return. Plain language questions guide you through your return while the software does the math, providing you with helpful prompts throughout the process.
Software 2: H&R Block
H&R Block Overview
|Edition||Best For||Price||Start Filing with H&R Block|
|Free (Online) and Basic (Download) Edition||Basic Filing||Free (Online Only)|
|Deluxe Edition||Itemized Deductions||
|Self-Employed Edition||Self-Employed and Small Business||
H&R Block, well known for its brick-and-mortar retail presence with about 12,000 locations nationwide, is another popular choice among tax filers. Pricing is lower than some competitors for most of the company’s online tax software solutions, which offer three software versions for personal taxes above the free online tax filing service.
An additional version caters to small businesses. Similar to other online tax software providers, H&R Block’s free filing service caters primarily to renters who aren’t self-employed and who don’t have investment income.
Homeowners without investment income can use H&R Block’s Deluxe package; if you have investment income, including investment real estate, or if you’re self-employed with business expenses less than $5,000, you can use the company’s Premium package.
H&R Block also offers support options. Free online chat with a tax expert is available for paid software packages and an add-on provides “Tax Pro Review,” which brings an extra layer of security in the knowledge that a trained professional is checking your work. Be aware that this option, as with similar options from competitors like TurboTax, can cost as much as the tax software itself.
All versions except the free version allow easy import of previous taxes completed by many competitors. While not as user-friendly as TurboTax in some ways, H&R Blocks tax software packages provide a trustworthy solution that’s affordable.
Software 3: TaxAct
|Edition||Best For||Price||Start Filing|
|Free (Online) and Basic (Download) Edition||Basic Filing||
|Deluxe+ Edition||Itemized Deductions||
|Self-Employed Edition||Self-Employed and Small Business||
TaxAct is often thought of as one of the least expensive options for online tax software. Generally, this rings true for TaxAct’s online editions. Pricing and promotions vary, however, so consumers should check current pricing before making a purchase.
One comforting feature of TaxAct is the company’s $100,000 Accuracy Guarantee, which guarantees the accuracy of your return but also ensures that your refund is maxed out as well. TaxAct backs its guarantee with up to $100,000 in coverage for any smaller refund or tax liability due to software errors. Human error — including input errors — isn’t covered, but the software is guaranteed.
You can import tax returns from previous years with H&R Block or TurboTax, and TaxAct makes your previous tax returns available for up to seven years.
Free phone or chat support with a CPA or an IRS enrolled agent is there to guide you if you get stuck. Be aware that support agents can’t assist with tax strategy or advice but can guide you on how income or expenses should be reported within the software. However, it’s great to have an agent at the ready to help navigate any bumpy sections on your return.
Software 4: TaxSlayer
|Simply Free||Free||Online Only|
|Self-Employed (Includes Small Business)||$47.00||Online Only|
TaxSlayer takes a different approach to pricing. Tax returns are completed online or through a mobile app, which helps to keep pricing affordable. Additionally, TaxSlayer makes all major tax forms available in all packages except the free package, which only supports Form 1040 EZ.
Step-level and premium packages bring additional options, like live chat and help from the company’s “Ask a Tax Pro” service. Many competitors require a premium package for access to special forms, like investment income or itemized deductions. This means that if you can forgo some of the support features, TaxAct might be the most affordable option in our tax software roundup.
TaxSlayer provides an accuracy guarantee and use of its tax-free software is risk-free; you pay nothing until you e-file, which gives you ample opportunity to learn if TaxSlayer is the right product for your needs.
Software 5: Liberty Tax
Liberty Tax Overview
|Edition||Best For||Price and Platform||Start Filing|
|Simply Edition||Basic Filing||$19.95 Online||Start Filing with Liberty Tax|
|Basic Edition||Itemized Deductions||$29.95 Online|
|Deluxe Edition||Investors||$49.95 Online|
|Premium Edition||Self-Employed||$74.95 Online|
You might have seen a Liberty Tax rep dancing around a metro area dressed as the Statue of Liberty. This was to create awareness for a nearby Liberty Tax brick-and-mortar location or one of over 3,000 offices nationwide. Similar to TaxSlayer, Liberty Tax does not offer boxed or downloadable software. Tax returns are completed and submitted online or with a mobile device.
Also similar to TaxSlayer, you only pay when you file, so if you discover that Liberty Tax isn’t the best fit for your needs, all you’ve lost is a bit of time.
Tax filers with basic needs, including homeowners who itemize or those with 1099 or self-employment income, can complete their taxes affordably with Liberty Tax’s Basic package. However, if you have income (or losses) from the sale of a home, rental income, or taxable transaction from stocks or other investments, you may need to step up to Liberty Tax’s Premium package, which is pricier than some other options in our roundup.
No free filing option is available with Liberty Tax — but the pattern with free filing options is that homeowners, those who itemize deductions, those with investment income, or self-employed filers aren’t eligible. Most taxpayers using Liberty Tax won’t be affected by the lack of a free option.
An online questionnaire asks a series of easy-to-understand questions. Liberty Tax uses your answers to recommend a package that fits your tax-filing needs. Once you begin your tax return, free support is available through chat or email but is limited to questions about the Liberty Tax platform. Liberty Tax’s Pro Tax Support is also available for a one-time fee and provides support via email only.
Close only counts in horseshoes, as the old saying goes. It’s important to get it right the first time with your taxes. In some cases, oversights or errors in tax filing can come back to haunt you up to six or seven years after you file, by which time the details or records may be gone or misplaced.
Choosing the best online tax software for your needs is the first, essential step when filing.
If cost is the primary factor in your buying decision, a no-frills option like TaxSlayer may be a good fit. However, taxes can be a complicated topic and more advanced products like TurboTax can help make taxes easier to understand, likely reducing errors and a bit of angst as well.