Best Tax Preparation Software Based on In-Depth Reviews
- 200+Hours of research
- 50+Sources used
- 14Companies vetted
- 4Features reviewed
- 6Top
Picks
- Most companies offer free online software but charge extra for assistance
- The IRS offers a Free File for people earning $66k or less
- Look for software that provides a user-friendly interface and easy-to-find information
- Complex tax situations should be filed by a professional to decrease the risk of an audit
How We Found the Best Tax Preparation Software
The IRS & Free File
Update: As of this writing, the filing deadline for all tax returns has been extended to July 15th, in response to the Covid-19 outbreak. Individual taxpayers who need an extension beyond that date may request a filing extension with Form 4868, while businesses must fill out Form 7004.
Before delving into our top picks for tax preparation software, it’s important to talk about the IRS’ Free File program, formally established in 2003. Free File originally began as, and continues to be, an alliance between the IRS and the Free File Alliance, a consortium of some of the biggest names in tax preparation software, five of which are listed in this review. This alliance enables individuals that make $66k or less each year to file their taxes for free using one of the 12 companies listed on their website.
To date, 70% of American taxpayers are eligible to use Free File. However, according to estimates by ProPublica, less than 3% of Americans are taking advantage of this free software. Why? Because many in the private sector make it difficult to find the Free File versions they offer. This lack of transparency has given way to a lot of confusion and misunderstanding amongst consumers, resulting in considerable backlash from industry watchdogs like ProPublica.
Moreover, companies partnered with Free File don't have an obligation to advertise their Free File options on their regular websites. This means that those who search for a free option directly through TaxAct, for example, will only find the regular consumer’s free edition, not Free File’s. This is critical because, unlike the regular free edition, Free File is designed to handle all tax schedules and forms, no matter their complexity.
In order to get access to the actual Free File software versions, we recommend typing in the name of the company along with the words “FREE FILE” or “FREE FILE IRS.” These options, though, are only available during tax season, which normally runs from January 1st until April 15th. As part of the measures pertaining to the Covid-19 pandemic, this deadline has been extended until July 15th.
Still, not everyone qualifies to file their taxes with every company that offers their services through Free File—even if they earn less than $66,000. This is because Free File partners are free to establish the criteria to qualify for their services.
For example, in order to be eligible for TurboTax’s 2018 Free File edition—dubbed Freedom edition—you must either have an AGI of $33,000 or less, be eligible for Earned Income Credit, or be an active duty military member earning $66,000 or less.
However, if you do fall under this income category, we strongly suggest you check out Free File’s available options before considering purchasing or even signing up for a specific company’s free software.
Our Top Picks: Tax Preparation Software Reviews
Tax season is not the most exciting of times. For most Americans, it can be a stressful and daunting period, especially if it means dishing out hundreds of dollars to pay for someone to prepare our taxes. Luckily, technology has managed to both simplify and cheapen tax season, if only slightly.
Over the last few years, electronic filing, or e-filing, has become the most popular and desired way to file taxes. More and more people are choosing to file their taxes through computer software or cloud-based programs given the convenience and low pricing offered by many companies.
All the companies in this review include at least one baseline free option for simple tax situations (i.e. single filers with 1040 Forms), as well as maximum refund guarantee and 100% accuracy guarantee—important factors when considering a self-filing software purchase. It’s also important to remember that in nearly all instances, the free versions offered by the companies reviewed below are more than enough for users with very basic tax situations.
This site does not include all companies or all available offers. Companies listed below are listed in alphabetical order.
Credit Karma review
Best 100% Free Service
Screenshot CreditKarma.com, November 2019
Credit Karma may be the tax prep newbie on this list, but its features are more comprehensive than those on its competitors’ free tiers. CK offers free filing options for both State and Federal returns, as well as automatic W-2 import. The program also guarantees maximum refund and accuracy in its software, and free Audit Defense for assistance and consultation with your specific case, as well as representation before the IRS. The program also includes assistance with identity theft, and tax debt resolution options.
In part because of its free nature, the company has been said to be lacking in areas such as customer support options, although users receive step by step educational guidance as they go through the filing process. The program also doesn’t support all possible federal forms, and not all State returns are available, so it’s important to make sure your specific situation is covered before you file.
FreeTaxUSA review
Best Affordable Paid Service
Screenshot FreeTaxUSA.com, November 2019
Founded in 2001, FreeTaxUSA has become one of the best options for affordable tax filing. It offers 100% free federal filing, supporting everything from itemized deductions, investment income, rental income, self-employed income, HAS contributions, plus Maximum Refund and Accuracy Guarantee. Although the program doesn’t include automatic W-2 import or a mobile app, it has other affordable add-ons that could help ease you into completing your tax return.
FreeTaxUSA’s Deluxe edition, available for $6.99, gives you access to unlimited amended returns, live chatting with a tax specialist, audit assist, and priority support in the customer service queue. The program also offers State filing for $14.99, which is a considerably lower price than other competitors.
If you receive a lower tax liability using another software program, FreeTaxUSA will provide you a refund of any fees you paid with them, plus provide you with a coupon for a free amended tax return. Likewise, if the software makes any mistakes on your return that may lead to you being audited, FreeTaxUSA will pay any penalties and interests associated with your audit.
H&R Block review
Best Overall
Screenshot HRBlock.com, November 2019
H&R Block is a staple in the tax prep industry and a household name among customers. Although not all of its hundreds of tax professionals are accountants, H&R Block guarantees that their professionals undergo a 14 level certification program and must assist to at least 15 hours of continuing education a year.
H&R Block offers downloadable and online cloud services, both offering three specialized plans.
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Basic Software starts at $29.95 for simple federal returns, while its paid online option begins at $49.99. Both versions include a maximum refund guarantee and a 100% accuracy guarantee. The company’s free federal filing option allows you to take a picture of your W-2 and upload it, while also offering technical support via live chat. Moreover, it covers Schedules 1-6. This means that student loan interest deductions, student tuition and fees statement, health coverage exemptions, and child and dependent care expenses can be filed for free.
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H&R Block Deluxe starts at $49.99 for federal returns and is the ideal option for homeowners and mortgage owners. While it includes all the free filing options and features, such as W-2 Snap-a-pic import and technical live chat, it also provides for storage of your tax documents and returns for up to six years, as well as technical support by phone.
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Tax Go Pro option, valued at $144.95, includes the services of a tax expert, who will look over your finalized return to ensure its optimal completion. This option also allows you to talk with an H&R Block tax professional for guidance and support. Also, the company announced that they will begin offering virtual tax prep in January 2020.
Online versions, including the free edition, will only provide audit support. Similarly, the downloadable service includes one State file valued at $44.95, whereas online options don’t include State files in any edition. With both the online and downloadable software versions you also have the added feature of being able to amend your returns in case a mistake is made.
Regarding customer support, H&R Block offers an online help center full of FAQ’s and relevant articles to help answer tax questions. While its free online version includes live chat technical support, the paid versions also include assistance via telephone.
TaxAct review
Best for Foreign Income
Screenshot Taxact.com, November 2019
TaxAct is another inexpensive option for filing federal taxes online. Like H&R Block and TurboTax, TaxAct also has Free, Basic, Deluxe, and Premier online plan options ranging from $0 for simple tax filing to $57.95 for more complicated tax situations, like self-employed income. Additionally, TaxAct offers downloadable software for those who would rather keep their information in one place, rather than have it in the cloud, plus seven years of access to your returns.
A somewhat unique feature of TaxAct is that it gives you the option to file taxes on foreign income, a necessary tool for U.S. citizens or U.S. residents working abroad. The company offers this through its online and software Deluxe versions, valued at $47.95 and $87.90 respectively.
On the flip side, TaxAct might be a better option for those who have more experience filing taxes, or are familiar with their tax situation, since TaxAct’s educational tools and the language used in its software has been reported by users to be too technical and littered with jargon. Also, TaxAct’s customer support features are not as encompassing as those of its competitors.
Finally, while the company does not include formal audit assistance, you can purchase audit defense from a partner company, Protection Plus, for $49 at the time of your filing (you won’t be able to purchase it after you file.)
TaxSlayer review
Best for Active Military Personnel
Screenshot Taxslayer.com, April 21, 2021
TaxSlayer is one of the most affordable online tax filing services, with three paid filing options ranging from $0 to $64.95 for a federal return. Qualified filers with just a W-2 and no dependents may use Simply Free and file both state and federal returns at no cost.
With the Classic option, anyone can file a federal tax return for just $34.95. All the necessary tax forms and tax breaks are included. Active-duty military can use Classic to file a federal return for free.
TaxSlayer Premium is designed for filers who need a little extra help. For just $54.95, Premium users receive audit assistance, access to Ask a Tax Pro, and front-of-the-line support via phone, email, and live chat. For self-employed tax filers, the $64.95 TaxSlayer Self-Employed option includes access to a tax expert specializing in your unique situation, plus tools and resources to help you manage your taxes year-round.
TaxSlayer also offers several kinds of IRS tax assistance and protection to plan purchasers, including IRS inquiry assistance (Classic option), tax audit assistance (Premium Option), and tax audit defense (Self-Employed Option). The company promises all customers 100% accuracy and guarantees you'll receive your maximum refund—providing an extra measure of peace of mind for its customers.
TaxSlayer offers an impressive courtesy to active military personnel. Qualified service members can use the service for free. The company states that the offer covers all tax situations and income types and that it will help service members find and claim all the tax breaks available to them. The offer also includes an accuracy guarantee and a year's worth of assistance with any IRS inquiries they may receive.
TurboTax by Intuit review
Most User Friendly
Intuit’s TurboTax has been around for decades and is often considered the premier tax preparation software. In part because of their extensive experience in the business, TurboTax has managed to craft one of the most visually appealing and easy-to-use tax programs currently on the market. The company reports an impressive tax statistic: the average refund customers receive when using TurboTax is $2766.
Screenshot from turbotax.intuit.com, December 28, 2021
TurboTax is not cheap software, but for those who are willing to spend a little more on support, it’s a good choice. Like its main competitor, H&R Block, it has both downloadable and online versions. That being said, depending on the complexity of your tax situation, the price of TurboTax’s paid editions could be well worth it to you. The company offers a Deluxe plan that checks your tax return against 350 potential tax deductions for $39. Its Premier plan is designed for taxpayers with investments—including cryptocurrencies—and people who derive income from rental property and is available for $69. TurboTax also publishes a version of its software for self-employed individuals, who often have to file more complicated tax returns, for $89. Currently, the company is offering a limited-time promotion that reduces the cost of all of its paid plans by $20. But more importantly, TurboTax paid editions offer several add-on support features that stand out among tax prep programs.
One of TurboTax’s best guidance tools is Smartlook. The tool is available in all paid versions of the online product. With Smartlook, users of the Deluxe, Premier, and Self-employed editions can simply type in their questions and expect to receive a prompt callback from a designated TurboTax specialist.
TurboTax also supports the LatinX community with a Spanish-language version of its software and by employing Spanish-speaking tax experts to provide live tax assistance.
Additionally, TurboTax offers the TurboTax Live categories, its priciest category but a good investment for those who prefer to have round-the-clock help. TurboTax Live is available for each of the online tiers. With Live features, you get everything the regular tier offers, with the added features of having unlimited/on-demand assistance from a TurboTax tax expert, year-round expert advice and guidance, and a final, fine-tooth comb review by a TurboTax expert before you file.
All TurboTax plans include a 100% accuracy guarantee. The company also guarantees customers their maximum possible refund. That's not uncommon among companies that sell tax preparation software and services, but it does provide taxpayers more peace of mind when filing.
It should be stated that, when it comes to these features, TurboTax does say that “Service, area of expertise, experience levels, wait times, hours of operation and availability vary, and are subject to restriction and change without notice.” If you tend to be a last-minute filer (like many of us are), it’s important to keep this in mind, as it might take longer to get the help you need the closer it gets to the tax deadline. So if you feel you may need extra support, it's best to file early through TurboTax.
Further Insight into Our Methodology
Over the years, tax preparation software companies have become more and more alike in their plan options, due in part to the increasing popularity of these services. During our research, we found that some of the most famous software companies have increased their pricing in order to compete with companies offering similar plans. For this reason, one of the factors we looked at most closely was service features.
Many companies offer similar plan structures: a free version for simple filers; a second-tier program usually designed for homeowners or people with mortgages and loans; a third-tier tailored to people with investments and more complicated income situations; and a final fourth-tier aimed at small businesses and the self-employed. However, the most pronounced difference between these plan options has to do with how much technical tax and software support each tier provides.
Additionally, all options include varying degrees of customer and technical support, depending on the specific plans. For the online versions, all but one—FreeTaxUSA—offer both web-based and app-based platforms so you can complete your tax return on any device. It should also be emphasized that base prices for software usually only include federal filing. Meaning that, with the exception of a few software/desktop versions—and one online version—state filing forms usually have an additional charge.
In addition, because using this kind of software essentially means you’ll be filing taxes for yourself, other important elements to look out for include ease of use, customer support, pricing, and company insurance and guarantees.
Plan Options & Pricing
Tax preparation software is widely known for being a more affordable option than traditional tax preparers—and indeed many companies offer free tiers for simple filers. However, for more premium services, such as superior tax and technical support or audit protection, many companies increase their prices considerably, frequently matching those of a traditional preparer or Enrolled Agent.
Conversely, some companies offer very affordable plans, but lack the added support or educational materials customers may need to file their returns. This being the case, we evaluated the types of features provided in the different plan options, in order to assess whether the product would be worth the higher or lower price tag.
It’s important to remember that purchasing this type of software is not a one-time deal, meaning you’ll have to repurchase it every tax season if you opt for self-filing. For this reason, it’s important that services be affordable, yet comprehensive enough for you to file without any major hassles.
Maximum Refund & Accuracy Guarantee
These two elements act as warranties on your purchase and hold the company responsible if the software were to make any errors on your return. A maximum refund means the company claims that its software will get you the highest refund from your return. In case it doesn’t, and some other software gets you a higher number, the original company will often refund you for the software.
Meanwhile, an accuracy guarantee ensures that the company will pay any fees or penalties you incur, in the event that the software makes any errors leading to your being flagged or audited by the IRS. The amount that is reimbursed varies from company to company, with some offering up to $100,000.
Because filing your taxes means you could either receive or have to pay large amounts of money, it’s important this software provides you with the peace of mind of knowing that if anything goes wrong, the company has you covered.
Service Features & Ease of Use
A lot of online software nowadays comes with added features to make your tax filing experience as smooth as possible. For this reason, we looked at things like audit protection, which guarantees the company will at the very least guide you through an audit process in case the IRS flags you. Some companies even offer free audit representation before the IRS.
In addition to tax expert support and audit protection, many companies include apps so you can complete the process on any device at any time, as well as automatic W-2 import for an easy input process.
The other essential component of tax preparation software is the ease of use with which users are able to navigate their filing experience. One of the selling points of tax prep software is its visual and clear-cut experience, as opposed to the traditionally dull and time-consuming paper and pencil tax forms. In addition to an attractive interface, the software should also provide clear, step-by-step instructions for the average taxpayer with basic or limited tax knowledge. These additions were especially important when we considered pricing tiers.
Customer Support & Guidance
The quality of the customer support will often go hand in hand with pricing, with the most premium and comprehensive tax support only available for those who purchase the costlier tiers, while some companies offer additional support for an extra price.
Tax support is arguably one of the most important aspects of tax prep software, given that users might have a hard time with specific prompts or questions. Having readily available access to professional help provides you with the peace of mind that comes from knowing you won’t fill out your return incorrectly and then have to spend additional cash amending it later on.
Helpful Information About Tax Preparation Software
When to use a tax preparer over a tax software
Perhaps the biggest question surrounding tax preparation software is why use it at all. It might be easier for some people to find a nearby tax preparer that carries out the messy work for them. It might be even easier to just hand their tax information over to friends or family members who have some experience filing returns. But due to its ease of use and flexibility, self-filing with tax preparation software has become a popular alternative for millions of Americans each year.
The truth is, the method selected for filing taxes depends on multiple factors such as how much you master the tax code and your own tax situation; how much time you have before the federal due date; how much money you’re willing to spend on your tax preparation; and the really big one: how complex your tax return is.
The cost, time, and complexity of your taxes will be the deciding factors on which method you should use for filing your returns.
*As explained by CGESoft software developer, José Vidal
Cost
In 2017, the National Society of Accountants reported that the average fee for a professional tax preparer in the United States ranged from $176 for a non-itemized 1040 Form to $457 for an itemized 1040 Form with a Schedule C (for Businesses) and State return. Due in part to these high prices, self-filing across America has increased.
According to Statista, in 2017, around 35% of Americans used an online tax filing program. Meanwhile, in 2018 the IRS reported that 89% of the 141,531,000 tax returns filed were done so electronically. Almost 43% were reported as self-filed.
Tax preparation software, on the other hand, may range in cost from $0 to the mid-hundreds, depending on how comprehensive you wish your software to be.
Time and Flexibility
In addition to affordability, an attractive selling point of tax software is that returns can be completed from the comfort of your own home, or, if you’re using online software, from the comfort of anywhere with a secure Wi-Fi connection. You should always verify that you're using a secure network when completing your tax returns to protect yourself from hackers and possible identity theft.
People who are nearing the tax deadline may also opt to use this software given the quick accessibility and freedom to work on their returns for a lower price than a traditional preparer, although many software companies also increase their prices when the federal deadline is approaching.
Complexity in Tax Situation
So, what exactly is the rule of thumb for figuring out which tax filing method is most appropriate?
According to Grapeson Wilson, a Certified Public Accountant in the Houston area who specializes in tax preparation for small to medium-sized businesses, “Software is good for somebody who has basic knowledge about their tax situation and has a simple tax return. If a person has a complex tax code, I say get the help of a tax preparer. It’s worth their money.”
Complex tax returns should be left to professionals because there are higher chances a not-so-knowledgeable person may mess up their own return. If that happens, the possibility of getting audited becomes very real and very expensive. Because of everything you’d end up paying in interest, penalties, and ultimately a tax preparer’s amendment fee, Wilson recommends people with complicated returns just go straight to a tax professional, “The money that they pay for the tax preparer is worth the hassle they have to face in fixing those mistakes.”
Even if you do have a relatively simple return, it’s important you have at least some basic knowledge about how your taxes work since the software will be responding to the prompts and information you log into it. “This tax prep software is asking you questions, telling you you need to input this information here, but you still need some understanding of taxes. [For example] we might think a question doesn't pertain to us when it really does, or we answer it incorrectly, getting incorrect results” said Annette Nellen, professor of accounting and director of the Master of Science in Tax at San Jose State University.
Situations that may complicate your tax return include moving to another state, getting a divorce, starting a small business, renting your property, or taking up a part-time job in the new “gig economy”. If you have different sources of revenue or have engaged in multiple investments, this is usually a sign your return situation may be more complicated than usual.
Ivette Luna, a CPA based in San Juan Puerto Rico, echoed this idea by stating how more schedules on a return usually mean more complexity: “To the extent that the individual's financial situation or condition requires completing more schedules—for example, if they have different types of income, deductions, etc.— [their tax return] becomes more complex.”
However, this doesn’t mean that some software programs can’t handle these situations. In fact, many tax prep companies offer different versions tackling different levels of complexity and including different types of forms for unique situations. The issue with using software arises when an individual doesn’t have the knowledge or a good grasp of their own tax situation, and so aren’t aware of what credits they could receive, or that, say, their alternate income is taxable. “We don't do any kind of education about what taxes are, what your responsibility is [as a taxpayer],” added Nellen, “it's just always left as something you're supposed to figure out on your own. It's an odd system”
That being said, tax software may be ill-equipped to handle the complexities of cross-border situations, such as U.S. filers who are living outside the United States. Joshua Ashman, partner at Expat Tax Professionals, cautions, “U.S. expat taxpayers are particularly susceptible to misfiling because of the complex international issues and additional reporting requirements that can significantly affect the tax return of a U.S. citizen living abroad. For example, U.S taxpayers that have an interest in specified foreign financial assets and meet the reporting threshold, must report their foreign financial assets under FATCA. Furthermore, all U.S. persons that have an aggregate interest of $10,000 or more in foreign financial accounts must file a Foreign Bank Account Report (FBAR) on an annual basis. A number of additional forms may be required, including with respect to ownership in non-U.S. companies, trusts, and pensions, among many other circumstances. Penalties for non-compliance can be severe, so citizens abroad should consider hiring a preparer with the relevant expertise and experience.”
In the event that you do choose to go for a tax preparer, it’s important to choose one whose expertise fits your tax needs. The IRS has compiled a list of tax preparers in their Tax Return Directory that may help you find tax preparers in your area.
What to Watch Out for When Buying Tax Preparation Software
Controversy within the tax prep software industry
Because of our commitment to transparency, it’s important that we mention one of the biggest controversies surrounding tax preparation giants in the industry. Companies like TurboTax and H&R Block have been known to employ misleading tactics in order to get consumers to pay for their pricier options. Industry watchdogs like ProPublica have published several reports in which they outline the many ways these companies deliberately trick customers into paying for their services, even though they may initially be advertised as free. Throughout our research, we were able to detect reports of this kind of behavior by reviewing consumer reviews of different software brands.
Moreover, companies like TurboTax have also been reported to deliberately hide their Free File options from the regular public over the years, the result being that only 3% of Americans earning below $66,000 use these free services. In March 2019, the IRS reported that 55 million returns have been filed using Free File since its inception in 2003. For a service that claims to cover 70%—or 100 million—Americans, this number has been considered low by many commentators.
Free Software Advertising & Company Website Disclaimers
As we’ve mentioned throughout this article, many users have encountered issues concerning the “free” advertisement of specific services offered by many companies. The main complaint is that these companies often offer free software for simple filing but automatically upgrade users—without their knowledge— to higher and pricier tiers towards the end of the filing process. By the time the program lets users know they've been upgraded, they’ve spent hours going through the process, and are often forced to start the process all over again if they reject the proposed upgrade. This is not only something customers have reported, but industry watchdogs like ProPublica and other media outlets have also written extensively on this consistent behavior by the tax prep software industry.
For this reason, we encourage those considering purchasing tax software to carefully read each company’s website disclaimer regarding their particular policies on their products. Upon examining many of these disclaimers ourselves, it was clear that there are a number of exceptions to certain deals, as well as instances where deals or products are subject to change over particular instances throughout tax season.
FAQs About Tax Preparation Software
How do I receive my tax refund if I use tax software?
This varies from company to company. Some give you the option to choose a Refund Advance wherein the company lends you the money you’d get on your refund and loads it onto a prepaid card, so you’ll have almost immediate access to it. Once your tax refund comes in, the advance amount is deducted from your refund, automatically paying back the loan. However, the most common way to receive your tax refund is through direct deposit, which is the option theIRS recommends for faster returns. You can even track the status of your refund with the IRS Where’s my Refund? tool. Refunds are expected to arrive in 21 days or less, according to the IRS.
What’s the difference between the downloadable desktop version and online versions?
Essentially, mobility, backup, and storage.
Desktop versions of tax software are quickly decreasing in popularity due to the accessibility provided by online software. Desktop versions can only be used in the computer they were installed in, and often require specific Windows or Mac versions. Likewise, the information you feed into the software is stored solely on this device. With online, cloud-based versions, you often have the flexibility to work from anywhere you can sign into your account, and the information is stored in the cloud, so you’ll be able to easily access it from anywhere. Many online versions also offer mobile apps so you can complete your tax return on your phone or tablet device.
What happens if the software makes an error on my return?
Most popular tax software companies offer accuracy guarantee, assuring customers that if the software makes any mistakes, the company will pay any penalties and fees incurred with the IRS. It’s important to verify that the company guarantees this before deciding to use or purchase specific tax software.
What are the advantages of using tax preparation software?
Tax software can be a lot cheaper than many traditional tax preparers, especially if you have a simple return. Online tax software also provides more flexibility, since you can use any device to fill out your return from anywhere with a safe internet connection.
Can you amend a return using tax software?
It depends on what company you use. Some companies offer free amendments on already-filed returns, while others charge extra for it. It's important to look at the company’s website in order to confirm.
However, it's important to remember that the IRS does not accept e-file amended returns, meaning you’ll have to print out the amended return (1040x Form) and mail it to the IRS along with the original.