Confusing and stressful are two words that accurately describe tax season in America.
Between the massive piles of complicated paperwork, a chance of owing even more to Uncle Sam, and the threat of penalties for a clerical mistake, it's safe to say nobody likes filing their taxes.
That's why many Americans hand off this duty to an accountant, shelling out an extra $273, on average, for tax prep services. Fortunately, there is a middle-ground between filing your taxes yourself and shelling out a few hundred dollars to have a professional do it: Tax software.
Now, let's review seven of the best tax software so that you're ready on April 15th.
What is Tax Software?
Tax software lets you do your taxes entirely online. Add your income, investment and business expense data, and the software will do the rest for you (i.e., Figuring out whether you owe or if you're entitled to a refund). You can then print your completed tax forms to send in the mail or have the software submit your filings digitally.
All you have to do is take a photo of your W-2 (and other tax forms), upload them to your tax software of choice, allow the program to auto-populate this year's records, key in a little extra information, and then click "submit."
It's really that easy!
The Benefits of Using Tax Software
According to the IRS, the typical taxpayer will spend about four hours filling out their tax forms each year (13 hours if you also consider the time you'll spend record-keeping and tax planning).
Now, tax software won't give you a "get out of jail free card" for tax filing, nor will it guarantee you don't have to sacrifice a beautiful spring afternoon to dedicate time to working on your taxes.
However, it can make your annual tax filings less time-consuming, far less stressful, more affordable, and more accurate. This tech-savvy method is, ultimately, about convenience.
Let's take a look at a few of the clear benefits of using tax software:
It's Cheap (and Possibly Free)
Most reputable tax software costs less than $60—about 22% of the cost to hire an accountant to file your taxes for you. You may even be eligible to use the free versions of tax software if you don't own multiple homes or have a complicated investment portfolio.
You Get Access to the Pros
Even though tax software simplifies the tax filing process, there's always the chance you'll have questions along the way. Fortunately, many online tax programs will provide you with a toll-free number or a chat feature to speak with a tax specialist for a little guidance. You don't have to hire and pay a CPA for simple tax returns anymore. If you are just filing income tax forms, tax software will do the job without a tax professional's hefty price tag.
Get rid of the guesswork and submit your returns confidently!
Errors Are Far Less Likely
When you prepare your taxes by hand, you may accidentally skip a field, miscalculate or have sloppy handwriting. The last thing you want is to receive a letter from the IRS, letting you know that you have to redo your taxes because you made an error. If you are a small business owner or a freelancer, online tax filing has never been easier. Keeping up with self-employment income can be a headache, but with tax preparation software and premier customer support, filing your taxes has never been easier.
Online tax software ensures that you fill out your tax forms in their entirety and that your calculations are correct—the system will do the math for you!
Fast-Track Your Tax Returns
Using tax software to file your taxes can fast-track the entire process, sometimes taking just 1-2 hours instead of the standard 4.
It certainly helps that tax software will import your tax documents from last year. That's less time you have to spend searching for the previous year's taxes and manually entering data. There are even free options available if your taxes are simple.
With these benefits in mind, let's take an in-depth look at some of the best tax software.
Hands-down, the best tax software of 2020 is H&R Block Deluxe.
For a humble $49.99 (and an extra $44.99 for every state return you file), you can flesh out your state and federal returns quicker than ever with 100% confidence on your end—even if you're a first-time filer. Your purchase comes with a little peace of mind, thanks to the maximum refund guarantee, free tax audit assistance and reimbursements for inaccurate calculations.
H&R Block ensures you get what you're entitled to without overpaying Uncle Sam by a dime.
Everyone likes surprises, but not when the "surprise" is that you owe hundreds of dollars more in taxes. With the Price Preview feature with H&R Block, you can monitor your tax refund as you continue. You can avoid the shell-shock when you click "submit" and be sure you're getting every deduction you're entitled to as a taxpayer, such as a mortgage interest and property taxes.
If your tax filing situation is a little more complicated than a basic 1040 or W-2, you may want to spend an extra $60 for outstanding customer service access.
With this add-on, you can feel free to reach out to H&R Block's skilled tax experts to help you along when you get stuck on even the most confusing tax forms. You can be 100% you file your taxes correctly the first time. Nothing gives you a better peace of mind than the ease of use of the H&R Block software.
David Baddeley, Director of Scottish Trust Deed, shares, "I would personally recommend H&R Block as one of the best-known tax preparation firms. It has a number of storefront tax prep outlets scattered, along with a powerful, user-friendly online tax preparation option for at-home filers."
TaxAct Deluxe+ Edition is expensive ($54.95 plus $54.95 per state filing), but this lesser-known tax software offers peace of mind like no other.
The real game-changer with this software is its efficiency.
After you complete your federal return, it'll automatically add your tax information to your state filing—this can chop the time it takes to complete your state return to just a few minutes. The software will also monitor for errors and omissions along the way to prevent a potential audit and maximize your refund for a little extra spending money.
Errors aren't entirely preventable, but they won't break the bank if they happen with TaxAct Deluxe+ Edition. Any miscalculations via the software (such as a lower refund or incorrect liability) will make you eligible to receive up to $100,000 to make up the difference. But with the hyper-focus on itemized deductions, you'll likely be more than happy with this year's returns.
TaxAct takes the benefits of the average tax software and brings it one step further. There's no better time to fill out the FAFSA to see if you're eligible for student loans than when filing taxes with TaxAct. You can also sign up to get an email or text to let you know that your refund is on its way!
Most people know Jackson Hewitt as an in-person tax prep service, but the financial guru now offers Jackson Hewitt Online Deluxe software at $49.95 plus $44.95 for each state return.
Jackson Hewitt Online Deluxe covers nearly every tax and income situation you may be in, but it's most useful if you have a family, you're a retiree, or you have student loans. If your income is less than $100,000, you may also be eligible to be one of the millions of taxpayers who file their state and federal taxes online through Jackson Hewitt at absolutely no cost to you (100% free).
Like every other reputable tax software, Jackson Hewitt wants to help you keep more in your bank account and out of the government's hands—that's both admirable and comforting. By simply answering the program's concise questions, you'll determine if you're eligible for credits and deductions that the government probably doesn't want you to know about.
Plus, you'll never have to open your wallet to pay Jackson Hewitt, so long as you're getting a tax refund. With the simple click of a button, you can electronically file your state and federal taxes, track your refund on its way to you, and choose to deduct your software fees from your refund.
"Free" doesn't mean what you think it means in the tax software arena. That's because there always seems to be a hidden fee, whether it's to file your returns electronically or receive customer support.
Credit Karma Tax is the only reputable tax software out there that's trustworthy and entirely free for both state and federal returns. The only caveat is that you must create an account with Credit Karma (which gives you access to free credit reports, meaning it's not all bad news!).
Besides the lack of costs, the feature that genuinely sets Credit Karma Tax apart from the other software on this list is the incredible information protection features. You can be 100% sure that your personal information—like your email address, social security number and wages—are shielded from the eyes of hackers thanks to data encryption built into the software.
Credit Karma also ensures any mistakes within the software won't hurt you financially. Thanks to Audit Defense, you can breathe a sigh of relief knowing that Credit Karma will reimburse you up to $1,000 if the IRS penalizes you for an incorrect filing. You may also pocket an extra $100 if you find that other tax prep software will enable you to cash in on a larger tax refund than Credit Karma calculates.
FreeTaxUSA is one of the most affordable tax prep software out there (federal is $0 and state is $14.99) that 43 million Americans have already entrusted with their tax returns.
The main reason so many people turn to FreeTaxUSA to take the reins during tax season is that the software can handle any filing scenario. That goes for whether you're filing jointly, have dependents, are self-employed, or have an impressive investment portfolio. But you can also spend an extra $6.99 on the Deluxe version for customer support on more complex returns.
FreeTaxUSA also happens to put accurate tax returns at the forefront for all customers. Not only will it triple-check that your tax forms are 100% correct before allowing you to submit, but it also will take responsibility for any calculation errors that impact your refund. And if the mistake is on your end—maybe you input your wages incorrectly—you have unlimited amended returns.
There's no sense paying for tax software when FreeTaxUSA does it all for free!
TurboTax Deluxe is undoubtedly on the upper end of the tax software price scale, but most taxpayers will find it well worth the $60 for federal filings and $50 for each state return filed.
What sets TurboTax apart from other tax software—even our #1 choice, H&R Block—is the unrivaled tax break locator.
By doing nothing more than answering the software's simple questions, you can learn whether you qualify for any of the 350+ tax credits and deductions you didn't even know existed, including dependents, education and homeowner breaks.
Answering these questions can also ensure you only fill out the forms that fit your situation.
Where TurboTax truly shines is in the world of customer service and tech support. A customer service agent is at your beck-and-call, willing to walk you through any questions you may have, and even able to draw on your screen for a little more direction. If you notice a sudden drop in your tax refund after completing your W-2, you can consult your expert to determine why.
Michael Hammelburger, CEO at Cost Reduction Consultants, adds, "We use TurboTax although it's quite more expensive compared to other tax tools. It's perfect for small and medium-sized businesses because it guarantees coverage on any gaps in your tax return plus the filing process becomes much easier and faster. It also offers insights on what deductions should be made so that we can optimize the profit that we can get."
Convenience is another reason many people find TurboTax Deluxe to be worth the extra cash. Not only do you get the choice for how you'll redeem your eventual refund (check, direct deposit, or prepaid Visa card), but you can also auto-populate your employer's and bank's tax data from TurboTax's massive database. The fewer manual data entries, the better!
TaxSlayer Classic is another great tax software that won't break the bank, costing a mere $17 and an extra $39 for each state return you file. But you can also invest an additional $37 in the Premium version if you're nervous about accurate filings and want priority customer support.
The area where TaxSlayer Classic shines brightest is the fact that you don't have to whip out your credit card to access the software. You can begin working on your taxes for free and choose to pay for the service at the end by taking the payment out of your tax refund. Or you may be lucky enough to be able to file a "Simply Free" return through the software if you only have a basic 1040 to file.
Another feature that seems like common sense, but isn't guaranteed with other tax software, is TaxSlayer's ongoing tax law changes. Whether you're filing taxes for this year or three years ago, you can be sure that you're sticking to the correct tax laws and getting the credits and deductions you deserve. Unexpected miscalculations are no longer as big an issue as they once were!
When you consider the fact that this software accepts any income type, regardless of the forms it calls for, TaxSlayer Classic may very well be the most versatile tax software there is.
What Is the Best Tax Software?
The best tax software is H&R Block's Deluxe Online (a free version is available too). This tax software allows you to import last year's returns via H&R Block or other software, upload this year's forms and snap photos of your W-2, receive technical support from skilled tax preparers, and store your returns for up to six years.
Whatever your tax situation is these tax software programs will help you with state tax and federal tax returns, audit support and additional filing options. Switching to efile and importing your taxes online will help keep your personal finance orders in line and make it even easier year after year.
Stacey Howard, Accountant at Cogneesol, also adds, " As we know, all the tax software comes with a 100% accuracy and a maximum refund guarantee. So, this does not matter which software you choose, because all offer the same services and you will get the same result."
"But, there are some things that we can look at while we selecting the tax software:
- Software cost and ease of use
- User interface
- Extensive support
- Ability to quickly navigate forms, Howard adds."
Some tax pro software even offer tax filers accuracy guarantees in their pricing models; you really can't go wrong doing your own taxes online!
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The 7 Best Tax Softwares: