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All Contents © 2020The Kiplinger Washington Editors
By Sandra Block, Senior Editor
Rivan V. Stinson, Associate Online Editor
| February 22, 2019
The Tax Cuts and Jobs Act lowered tax rates, eliminated some popular tax deductions and nearly doubled the standard deduction, which will sharply reduce the number of taxpayers who itemize on their tax returns. For many Americans, that should make filing this year’s tax return faster and easier, particularly for those using a tax software program. But if you think you’ll be able to breeze through your tax return in the time it takes to brew a pot of coffee, you may be disappointed. If you’ve itemized in the past, you’ll probably still need to plug in your mortgage interest, property taxes, charitable contributions, etc., to determine whether itemizing or claiming the standard deduction will give you a lower tax bill. And even if you’re confident you’ll claim the standard deduction, you could qualify for a raft of tax breaks available to non-itemizers.
Most of the tax software programs we tested alerted us to money-saving tax breaks. They also did an admirable job of asking questions that were relevant to our situations, without bogging us down with questions about, say, farm income. But some provide a lot more hand-holding than others, and prices were all over the map, ranging from free to more than $100 to prepare and e-file a state and federal tax return. Even a taxpayer with a fairly straightforward return could be forced to upgrade to a more expensive program if she has a modest amount of investment income or a health savings account.
Our advice going in: Know thyself. If you’re somewhat knowledgeable about the tax code and have prepared your own return in the past, a low-cost program with minimal assistance may be all you need. If you want lots of advice, a more expensive program that offers live chat, easy-to-find help topics and other tools may be worth the extra cost. Just make sure you read the fine print before you start plugging in your numbers.
All prices as of February 22.
Pros: Seamless navigation; plenty of support
Cons: Programs are pricey
If you’ve used TurboTax in the past, breaking up is hard to do. It does a superb job of transferring information from your prior year’s return, greatly reducing the chance you’ll overlook a 1099 from a financial institution or a charitable contribution (assuming you still itemize). TurboTax will also electronically import W-2s and 1099s from hundreds of payroll providers and financial institutions, a time saver that also reduces the risk of error.
TurboTax also wins kudos for explaining what has changed as a result of the tax overhaul (some other programs we reviewed made little or no mention of the changes that took effect this year).
Early in our test drive, TurboTax highlighted the new tax rates and brackets; a pop-up box also explained how the new tax law treats dependents. Assistance is never far away, whether it’s from the TurboTax user community or live video chat.
But loyalty comes at a price. The Premier online version, which you must use if you have investment income, costs nearly $100, as of February 22, for a federal and state return. If you have self-employment income, the price is even steeper: $130 for a federal and state tax return. And TurboTax is one of the software providers that uses surge pricing, so you can expect those prices to rise before April 15.
Courtesy H&R Block
Pros: Easy to navigate; plenty of help
Cons: Even taxpayers with straightforward returns may need to upgrade to Premium
If you had side income last year—even just a modest amount—you’ll need to upgrade to H&R Block Premium, which costs $87, to file a federal and state tax return, versus $67 for Block’s Deluxe program (these were the prices as of February 22). On the plus side, the program provides helpful explanations on deductions we may have qualified for, and it also offers unlimited support via live chat.
The program also gets points for helping us file more than one state tax return—a not uncommon situation for anyone who moved during the year or lives in one state and works in another. If you moved, Premium suggests which return to complete first once you enter information on the states you moved from and to during the year. If you live and work in different states, the program prompts you to check for income tax reciprocity agreements between the states, which can help you avoid double withholding from your paycheck.
If you qualify for the free version (W-2 income only; no itemized deductions, investment income or health savings accounts), you can file up to three state tax returns for free; otherwise, you’ll pay $37 for each state return.
Courtesy Credit Karma Tax
Pros: Free federal and state tax return, even if the return is complex
Cons: Can’t process multistate returns
While Credit Karma Tax still can’t handle multiple state returns, it makes up for it with ease of use and the long list of forms available. And it’s free. If you already have a Credit Karma account to check your credit score (which is also free), the tax program will automatically fill in information you’ve provided. During our review, we were also able to import a W-2, report contributions to a health savings account, record freelance and dividend income, and more.
Credit Karma does a good job of asking the right questions in the beginning to make sure you don’t miss any deductions, such as student-loan interest. But if you’re afraid you missed something, it’s easy to go back to a “life events” page and make any necessary updates.
Credit Karma Tax appears to have improved its live chat features. When we posed a question last year, we received a message stating that the response would be delayed because of a high volume of requests. This time around, a question about a missing 1099-MISC was answered promptly.
Pros: Classic version supports most returns
Cons: Limited support; prices subject to change
As has been the case in the past, TaxSlayer Classic provides a program that won’t force you to upgrade midway through the process, which is refreshing. For $17, plus $29 for a state tax return, TaxSlayer will handle all tax situations and forms. (Those were the prices as of February 22; TaxSlayer says they may change by the time you file.)
TaxSlayer’s website provides a useful primer on the tax overhaul and how it could affect you. However, you won’t see much about the changes as you work your way through the program. For example, when we entered a small amount of freelance income, we were asked a lot of questions about potentially deductible expenses, but the program made no mention of the new 20% deduction for qualified business income. We’re pretty sure the program gave us this deduction, but more information about this generous new tax break would help self-employed people or taxpayers with side gigs plan ahead.
Taxpayers with straightforward returns, along with those who know their way around the tax code, will appreciate the Quick File option, which allows you to go straight to the relevant tax forms and fill them in. Those with more complex returns or who just want a little more hand-holding can opt for a guided approach. But under TaxSlayer’s pricing model, you have to pay for help: If you want live chat or “priority” e-mail and phone support, you’ll need to upgrade to TaxSlayer Premium, which costs $66 for a federal and state tax return (as of February 22).
Pros: Low-cost options for straightforward returns
Cons: Limited customer support
For many years, TaxAct was the darling of budget-minded filers. They were willing to overlook its limited support and somewhat clunky navigation in exchange for a low-cost, reliable product. Many filers were able to prepare their federal and state returns for free.
Sadly, that has changed. TaxAct still offers a free federal and state program, but it’s limited to taxpayers with income from a W-2 job and/or retirement savings. Filers with dependents qualify for the Basic version, which costs a reasonable $9.95 for a federal return and $19.95 for a state return. But if you have a health savings account, you must bump up to the Deluxe program, which will cost you nearly $70 for a federal and state return. TaxAct says those prices won’t change between the time you start your return and when you file.
TaxAct will electronically import W-2s and other financial documents, which is a plus, but navigation is clunky. We had to go through five screens to report $100 in interest income. And like some of the other programs we reviewed, TaxAct gave short shrift to the tax overhaul.
Pros: Multiple state tax returns for one price
Cons: Minimal support
EFile Basic offers a free federal tax return for taxpayers with W-2 income only and no dependents. Taxpayers with dependents will need to upgrade to Deluxe ($25 for one federal return), and if you have a side gig or other self-employed income, you’ll need to jump up to Premium ($35 for one federal return). For an additional $24, you can file an unlimited number of state returns. That’s a real money-saving feature for people who moved last year. (All prices are as of February 22.)
EFile says it provides the same level of support for all its products. However, during our test drive, we didn’t see much in the way of explanations or advice, and it was difficult to review our work.
Courtesy Free Tax USA
Pros: Low cost
Cons: Clunky navigation; not much support
Free Tax USA says right up front that it makes money by e-filing and preparing state returns, which costs $12.95 per state. Even if your tax situation is complex, the federal tax return is free. If you want more assistance, you can upgrade to Deluxe, which costs $6.99 for a federal tax return and $12.95 for a state tax return. (All prices are as of February 22.)
Free Tax USA doesn’t provide a flashy program, but it gets the job done, especially when it comes to explaining the tax overhaul. If you’re confident that you’ll claim the standard deduction, for example, it lets you skip the deductions section. But it also points out that some states won’t allow you to itemize on your state tax return if you claimed the standard deduction on your federal tax return, which could result in a higher state tax bill. That’s an important reminder that we didn’t see anywhere else.