Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.
- TaxAct offers four tax-filing plans, including a free federal option for basic tax situations.
- TaxAct’s interface isn’t as detailed as some of its higher-end competitors, but it is easy to use.
- Pricing is fair, though customers should be careful to account for add-ons such as expert help and state returns.
I’m a personal finance nerd who looks forward to filing their taxes every year. In the years I owe, I find myself grateful for the abundance of the past year as I input each number into my tax filing software. In the years where I get a refund, I find myself celebrating every last penny of the “extra” cash.
But most people don’t take joy in filing their taxes. Most people are looking for a way to file that involves the least friction and low fees. TaxAct is one option on the menu.
TaxAct is an online tax prep company where you can prepare and file your tax return yourself. Like most online tax software, there are different packages that cover specific tax forms — the more complex your situation, the more you’ll pay. Filers who have experience with taxes and are looking for an experience with fewer frills and a lower pricetag will find it with TaxAct.
Here’s a look at how TaxAct works, how much it costs, and who it’s best for.
|Editor’s rating||3.9 / 5|
TaxAct gets the job done with fewer bells and whistles than H&R Block or TurboTax, though costs can still add up. It’s best for someone who has filed taxes on their own before and appreciates a simple, streamlined interface.
|Cost of DIY filing|
$0 – $64.95
+$4.95 – $44.95 per state
Free version covers
W-2 income; unemployment income; retirement distributions; interest and dividend income; tuition and fees deduction; earned income tax credit; child tax credit
Who should use TaxAct?
TaxAct is best for people who don’t want to pay for high-end software like H&R Block or TurboTax, but are still willing to pay a premium for an efficient and streamlined interface to file their own taxes.
Filers who don’t require much hand-holding or need to lean on expert support will get the most out of TaxAct.
TaxAct is not as cheap as TaxSlayer, but its tax document upload and import features have a better track record of working well than TaxSlayer’s do. If you’re willing to pay more for this time-saving feature, TaxAct could be worth it.
You might like filing with TaxAct if you:
- Qualify for free federal filing
- Have experience filing taxes
- Appreciate time-saving features like document upload or import
- Find TurboTax’s and H&R Block’s extra features distracting or overwhelming
- Want the option to upgrade for expert help
You might not like filing with TaxAct if you:
- Are looking for the cheapest option
- Want detailed explanations and guidance
- Need to file multiple state returns at an affordable cost
How much does TaxAct cost?
TaxAct’s formula is similar to that of many other tax-filing software companies: You pay one price for a federal tax return, and an additional price for a state tax return. Payment is due when it’s time to file, so if you’re not happy with your experience or refund calculation and decide to abandon your return, you won’t owe TaxAct anything.
TaxAct also now offers personalized support from tax experts at an additional cost. Some of TaxAct’s competitors, like H&R Block and TurboTax, have been doing this for years, and also charge extra.
DIY online filing
DIY + expert access
Federal return cost
$0 – $79.95
$35 – $154.95
State return cost
$4.95 – $44.95
$4.95 – $44.95
Federal + state
$4.95 – $124.90
$39.95 – $199.90
Prices do not include discounts.
Cost of DIY options and what they cover …
- Free. You can use this plan if you are paid through W-2s or collected unemployment income, and want to claim basic child tax credits and the earned income tax credit (EITC). Credits for childcare expenses aren’t included.
- Deluxe: $44.95. The Deluxe package allows you to file for those childcare expense credits, along with credits and deductions for homeowners, health savings account owners, and those who are currently paying student-loan interest.
- Premier: $69.95. This package is built for those with investment income, rental property income, and foreign bank accounts. If you sold a home this year, this is also the package for you.
- Self-Employed: $79.95. The self-employed have a unique tax situation with credits and deductions that vary depending on the structure of their business and the industry in which they work. TaxAct’s Self-Employed package addresses these specific needs.
Extra fees will apply if …
- You need state filing. If you live in one of the majority of states that require you to do state income taxes as well, you’ll have to pay an additional $44.95 per state. If you lived or worked in more than one state, you may have to pay for multiple state returns.
- You want help from a tax expert: For about double the cost of the plans outlined above, you can upgrade to get access to a tax expert on the spot or schedule an appointment. The all-in cost for the four plans ranges from $35 to $154.95 (not including state return fees).
- You pay TaxAct from your refund. If you’re expecting a tax refund, TaxAct will ask if you want to use part of it to pay for its tax prep services. It sounds more convenient than pulling out a debit or credit card on the spot, but a processing fee applies.
Note: TaxAct has two free filing options. The version outlined above has no income restrictions, but includes a limited number of tax forms. There’s another free version offered through the IRS Free File portal, which covers all tax forms for people with incomes below $63,000 and under age 57. In addition, all active duty military with incomes of $72,000 or less are eligible to file their federal and state returns for free.
How does TaxAct work?
TaxAct is a tax software company founded in 1998. Based in Cedar Rapids, Iowa, TaxAct is one of the biggest names in the industry.
When you first initiate the tax filing process with TaxAct, you will be guided through a series of questions. You’ll be asked if you have children, run a business, own a home, have student loans, and more.
All these questions allow TaxAct to recommend the best package for your tax situation. The interface of each package is slightly different, providing those with simple tax returns and those with self-employment income with appropriately different experiences.
As you’re guided through the tax-prep process, TaxAct pays particular attention to areas where “double answering” is common. For example, self-employed individuals with marketplace healthcare plans can potentially qualify for multiple credits, so you have to be sure you don’t double dip with the same qualified healthcare premiums. TaxAct catches these common errors, notifying you about what it’s doing behind the scenes to ensure all your calculations are accurate.
All plans except the free one allow you to upload or import W-2s and 1099s for easy data entry.
What do you get with TaxAct?
- Streamlined interface: Entering your data and navigating through forms on TaxAct’s platform is straightforward and clear.
- Double-check tool. TaxAct has a “Double-Check tool” that reviews a completed return to flag errors or omissions and help identify any overlooked benefits.
- Mobile app available. Through TaxAct’s mobile app, you can file federal and state returns, estimate your refund or tax due, and access help services.
- Multiple ways to get your refund. You can get your refund deposited into your bank account, sent as a check, or loaded onto a prepaid debit card.
- Tax return storage: TaxAct will store your finished tax returns in your account for up to seven years.
- Accuracy guarantee. TaxAct is one of the only tax prep companies that will pay any additional tax due to the IRS, up to $100,000, if their software causes an error. Competitors like TurboTax, H&R Block, and TaxSlayer will pay interest and penalties, but not the additional tax due.
Is TaxAct reliable and safe?
TaxAct keeps your information secure with data encryption. It also requires multi-factor authentication every time you log in to verify your identity.
When it comes to calculating your taxes owed or expected refund, TaxAct is reliable.
Are there any downsides to using TaxAct?
TaxAct’s free version doesn’t cover as many situations as TaxSlayer or H&R Block. If you’re repaying a student loan and are eligible to deduct interest, for example, you won’t be able to do that with the free plan (unless you earned less than $63,000 in 2020).
As for user experience, you won’t get guidance or explanations on every single tax concept like you would with H&R Block or TurboTax. If you find these features distracting or overwhelming anyway, TaxAct might be a better choice.
While there is a new option on TaxAct this year to upgrade and ask an expert questions about your return, it doesn’t include full-service professional filing or review of a completed return.
If you need to file a state return as well, you’ll pay more with TaxAct. While its pricing on federal returns falls in the middle of the market, its state return cost — $44.95, unless you qualify for free federal filing — is one of the highest.
Additional reporting by Tanza Loudenback.
Source: Read Full Article