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How We Tested
The Tester
My name is Taylor Medine, and I’m a money nerd and finance writer with seven years of experience digging into the fine print details of finance products so you don’t have to. I read terms and conditions as a hobby, and uncovering “gotchas” gives me an adrenaline rush. As a self-employed writer, I know intimately how stressful tax time can be, so I put my money-nerd powers to the test and reviewed what the top online tax software has to offer.
The Tests
We looked beyond the cost of the software to see which ones offer the best user experience for the average Jo(e) without intimate knowledge of tax laws.
Several tax preparation companies offer free product tiers for people with simple tax returns. “Simple” generally means that you’re filing W-2s or unemployment income and claiming the standard deduction. If you want to itemize your deductions or you earn income from a side hustle, rental property, or investments, you typically need to upgrade to a paid plan.
This year we tested five online tax-filing programs: TurboTax, H&R Block, TaxAct, TaxSlayer, and Jackson Hewitt. The products were chosen for testing based on their percentage of market share and/or visibility with the public. In addition to cost, we judged tax-filing software in three areas:
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Product experience: How easy is the software to use when entering and/or uploading information? How easy is it to report stimulus check payments to receive the Recovery Rebate Credit?
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Customer support and guarantees: How easy is it to find customer support, and how good is the support the user receives? What service guarantees are offered?
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Persona adaptability: How well did the software respond to the information from each of the fictional personas? More on that next.
Our Fictional Tax Filers
To test each online tax-filing software, we developed these four fictional personas with common tax scenarios:
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Carla Coder is a recent college graduate who’s filing as single. She works as a project coordinator at a tech company earning $50,000 per year and is repaying $30,000 worth of student loan debt. Carla has health insurance and a retirement account.
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Michael and Michelle DeAmbitous are a young married couple with one child who goes to daycare while Michael and Michelle are at work. They have a mortgage on their home. In 2020, Michael brought in about $65,000 as a freelance graphic designer, while Michelle earned $90,000 as a senior accountant.
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Peter Pensioner is a single retired man who’s enrolled in Medicare and receives IRA distributions and Social Security income. He’s paid off his mortgage and has no dependents.
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Marva Maven is a divorcee who was laid off in June when the boutique she managed went out of business because of the pandemic. She earned about $27,000 before receiving unemployment payments for the remainder of 2020 while looking for another full-time job. Taxes were not withheld from her unemployment checks.
What to Know About Filing Your Taxes Online
What documents do you need to file your taxes online?
The “bare minimum” most people need, according to Amy Northard, a CPA and owner of The Accountants For Creatives, are things like W-2s, 1098s, 1099s, and health insurance 1095 forms. You should receive these in your mailbox by late January, although Northard says two forms often don’t get mailed out: student loan interest forms and brokerage account 1099 statements. (The good news: You’ll likely find these by logging into your online accounts.)
If that all looks like a jumble of numbers to you, here’s a basic breakdown of these common tax forms:
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W-2: Your employer uses this form to report your wages and various taxes withheld from your paycheck throughout the year, and also notes things like your retirement contributions and tips. It mails you and the IRS copies to determine whether you owe additional taxes or should receive a refund.
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1095: As a health insurance holder, you’ll receive one (or more) of three forms. These detail the type and length of coverage you received under the plan.
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1098: There are a handful of 1098 forms, but the most common involve interest lenders received from loan payments. Specifically, be on the lookout for these if you’ve got student loans or a mortgage. You can also expect a 1098 if you paid college tuition bills during 2020.
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1099: There are more than a dozen types of 1099s. Essentially, these account for any income you earned that did not come from your employer. For example, if you worked as a freelancer or independent contractor, you may receive a 1099-NEC from clients. Anyone who received state unemployment benefits can expect a 1099-G to arrive in their mailbox. Money received from pensions, IRAs, and life insurance policies also falls under this category.
How do you file your taxes online for free?
If your adjusted gross income in 2020 is $72,000 or less, you may be eligible to file your federal taxes for free with the IRS Free File program. Several online tax-filing platforms are involved in the program, however, they set their own income and age limits. TurboTax, as we mentioned, caps AGI at $39,000, while TaxSlayer restricts filers above the age of 51. Keep in mind that you may be charged to file your state taxes.
If your AGI in 2020 is greater than $72,000, it may be possible to e-file using a tax software that has an unpaid version. However, if you’re planning on certain deductions, such as student loan interest, you may be prompted to use a paid version depending on the platform.
In a nutshell, you can file your federal taxes for free depending on what forms you need to submit. Read up on what forms TurboTax’s Free Edition supports here, and browse forms H&R Block’s Free Online version accepts here.
Here for the TL;DR?
Before we dive into more specifics, let’s roll the highlights reel. Time, as they say, is money.
First off, if you have an adjusted gross income (AGI) below $72,000, consider filing your taxes with an IRS partner that offers Free File. The Free File program lets you file both simple and complex federal tax returns with partners at no cost.
Three companies that we reviewed—TurboTax, TaxSlayer, and TaxAct—are Free File partners, but you have to sign up for this service at a separate home page and each platform sets its own income and age limits. Explore that option before you pay for a product. The IRS has a list of the Free File tax partners and the requirements on its website.
If you don’t qualify for IRS Free File and you have a straightforward return, including if you received unemployment assistance in 2020, we recommend TurboTax because it’s an uncomplicated process—you upload a PDF version of Form 1040 from last year to pre-fill basic information, and then TurboTax’s Q&A style questions quickly fill in the required tax forms.
The exception would be for filers with student loans who prefer a free version. In that case, turn to H&R Block. Its free version lets you deduct student loan interest, whereas TurboTax’s free version does not.
H&R Block also has a lot to offer for gig workers or side hustlers who do not have business expenses. These filers may manage with H&R Block’s Deluxe version (starting at $29.99) rather than other self-employed options that run around $80 on most platforms.
Other Tax Software We Tested
When to Hire a CPA or Tax Pro
Doing taxes yourself could save you money, but there are instances where it might be better to call in a tax preparer or CPA. Here are situations where you might benefit from expert help:
- You’re looking for strategic tax planning to help you prepare for retirement.
- You started a business or sold a business.
- You bought a home or got a cash windfall.
The cost of tax preparation services can vary depending on where you live. On average, tax preparers charge $188 to file a tax return without itemization and $294 with itemization, according to the National Association of Accountants. This is potentially three times what you might pay for a DIY tax software. However, this could be well worth the cost if you’re unsure about your return and want confidence that someone experienced is taking care of it for you.
What to Do When You Switch Tax Software
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One of the conveniences of using the same tax software year after year is having everything in one place. If you choose another product, you’re going to want to keep your documents somewhere safe and accessible—though this advice certainly applies to any of us filing taxes. The IRS recommends keeping most forms for at least three years. And you could need to produce your most recent W-2 when renewing your driver’s license, or applying for a mortgage or marriage license.
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In this case, we think it’s convenient to keep your documents digitally, partly to avoid paper clutter. Download PDFs of your federal and state return, and save the email confirming you’ve successfully submitted. Name each file with the year, and save them in secure password-protected folders on your computer, which you can do on both iOS and Windows.
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Then, back up your computer files with an external, encryptable hard drive, like the Western Digital portable hard drive, or a cloud-based service like Dropbox, Apple iCloud, or Google Drive. Whatever you choose, be sure it uses two-factor verification so your files are more secure.
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If you want to digitize physical paperwork, Lindsay O’Brien, a professional organizer and owner of Room to Breathe, recommends the mobile app Genius Scan, which allows you to take a photo of a document and convert it to PDF. “I especially recommend this for tax-related documents so that you can easily send the files to your accountant or easily upload to TurboTax or other tax platforms,” she says. The app’s free version has a solid privacy policy—documents are only saved automatically to your phone, not anywhere else—but for more sensitive documents, one of its upgraded versions, like Genius Scan Enterprise, makes it easier to restrict outside access to the files.
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Checking our work.
We use standardized and scientific testing methods to scrutinize every product and provide you with objectively accurate results. If you’ve found different results in your own research, email us and we’ll compare notes. If it looks substantial, we’ll gladly re-test a product to try and reproduce these results. After all, peer reviews are a critical part of any scientific process.
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