Best Tax Software 2018. We focused on well-known and widely used tax preparation software, and while their underlying math is the same — the tax code is the tax code — there is a crucial difference between paying for what you could use and paying for stuff you don’t need. Save money on TaxAct Professional federal and state tax preparation software and unlimited e-file with bundles. TaxAct 2019 Professional Bundles. Maximize your savings! Save $200 to $3,000. by purchasing your software & e-file as a TaxAct Professional Bundle. Click on features below to learn more. Whether tax season is something you look forward to or something you dread, its important in both cases to make sure your taxes are filed correctly. Fortunately, there are now a number of tax software programs designed to make the process easier.
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- Professional Tax Software For Preparers
- Lacerte Software
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- Tax Software For Paid Preparers
We’ve been testing the best tax software for 14 years and for our latest update we looked at eight of the most popular online tax programs and filed returns through them using common scenarios.
While most of the companies offer free versions, if you have a complicated return or want to take advantage of tax credits or deductions, you’ll have to pay to file for most of the products. The costs for a federal return range from $17 to $37. State returns rarely have free options and cost between $12.95 and $39.99 to file.
Best for free returns
Credit Karma
Reasons to Buy
Reasons to Avoid
No matter your filing status, Credit Karma lets you file your federal and state returns for free. Most other services’ free options are limited to basic returns – if you itemize your deductions or are self-employed and need to file a 1099-MISC, other tax programs require you to pay. To file your taxes with Credit Karma, you need to sign up for its service, which includes free credit reports and other tools to help you build credit.
The program is easy to use, and you can import your W-2 just by filling in your employer's EIN. Credit Karma then auto populates your income and tax information. As you complete your return, the program makes recommendations for deductions and tax credits you may be eligible for.
Credit Karma continues to update its tax filing service to compete with other programs. This year, it has started offering free audit protection, which gives you professional support in case your return is audited. The professional will help you respond to inquiries and explore your options so you won’t be on your own.
Easiest to use
TurboTax
Professional Tax Software
Reasons to Buy
Reasons to Avoid
When testing online tax software, we found TurboTax to be one of the easiest programs to use. If your employer is one of TurboTax’s more than 1,000 partners, you can directly import your W-2 into the program. If not, you can use your phone to snap a picture of your W-2, and the software will input that information into your return.
As you file your return, the program makes recommendations for deductions and credits you might be eligible for based on the information you enter. It also provides information on how you qualify and the benefits you might receive, which makes this a good program for learning more about your taxes.
If you’re filing a basic return, like a Form 1040, then you can file your federal and state returns for free. If you need to itemize your deductions or want to use TurboTax’s tools to maximize your tax credits, you need to use the Deluxe Edition, which costs $39.99 for state and federal returns. If you’re self-employed, you pay $89.99 for a version of TurboTax that specializes in helping self-employed and small business owners find industry-specific deductions.
Best for professional help
H&R Block
An online tax software with the most customer support options
Reasons to Buy
Reasons to Avoid
If you want help from a professional as you file your return, H&R Block is the best option. It’s well known for its offices across the country, but you can also file online with its tax software. If you file online, there are many ways for you to connect with a professional tax expert who can answer any questions you have about your returns. Also, if you pay an additional fee, you can have an expert review your return before you file it.
H&R Block’s tax filing software is easy to use. You can take a picture of your W-2 and import it, auto-populating your tax return with income and tax information from your employer. You can also import the previous year’s return, no matter what program you used to file it. In addition, the program uses your information to find deductions and credits that suit you.
Once you complete your return, you can run an accuracy check to see if there are any errors. The program takes you back to any errors, which makes correcting them quite easy.
If you’re filing a 1040, H&R Block allows you to file your state and federal returns for free. More complex returns with itemized deductions or mortgage deductions are best suited to the Deluxe Online edition, which costs $29.99 for federal returns and $36.99 for state returns.
Read the full review here: H&R Block
Best for basic returns
TaxSlayer
An online tax software that best for basic tax filing
Reasons to Buy
Reasons to Avoid
If you’re filing a 1040, TaxSlayer may be the best option. However, if you have a more complicated return, you have to pay for one of several upgraded versions. TaxSlayer Classic is recommended if you want to itemize deductions or make use of tax credits. This version costs $17, which is cheaper than other services offer for comparable returns. Basic returns, both state and federal, are free.
TaxSlayer’s online program is easy to use. For example, you can import your W-2 directly into the program to start your return, which saves you the time you’d spend manually entering that information. TaxSlayer highlights errors as you complete the return, but there’s no final review before you submit. There’s also a tool to help you find deductions and tax credits you might be eligible for. While it was useful, we found it to be a little buggy when we tried the program – it tended to get stuck in one place and wasn’t very easy to use.
Best for refund advances
Jackson Hewitt
Best online tax software if you are looking for a refund advance
Reasons to Buy
Reasons to Avoid
If you’ve found yourself in a bind and really need the money from a refund before the IRS disperses those checks, you can get an advance through Jackson Hewitt. Refund advances can be risky when interest is involved. If you want an advance on $3,500 or less, Jackson Hewitt doesn’t charge interest, and the advance amount automatically deducts from your return. There may be some fees attached to the refund advance, depending on where you live.
Jackson Hewitt offers advances on higher amounts, up to $7,000. However, you must select the Go Big Refund Advance, which has an APR of 35.9%. That is quite high, and we caution you against using this option. If you get an advance on your entire return, this could leave you paying more money than you get from your refund.
You can file state and federal returns for free through Jackson Hewitt if you have simple taxes and use the standard deduction. More complex returns cost $29.99 for federal returns and $36.95 for state returns.
Why trust us on tax software
At Top Ten Reviews we’ve reviewed tax software for 14 years. We make sure to only test the most recent version of each program. We also keep our eye out for new programs and try to avoid white label versions of the same software. This year we’ve included FreetaxUSA and Credit Karma.
As we evaluated tax programs, we consulted the National Association of Tax Professionals, an association dedicated to providing tax professionals with resources and education, about deductions and tax credits to look out for. One of the best credits is the Child and Dependent Care Tax Credit, which can be overlooked if you paid for the care through a flexible spending account. The NATP advises looking for tax credits, which are superior to deductions because they reduce your tax bill dollar for dollar.
When can you file your 2020 taxes?
Tax Day in 2020 falls on Wednesday, April 15. You can file anytime between now and that date, provided you have the necessary information. Employers are required to file and postmark W-2 forms by the end of January, so you should receive that information by February.
If you haven’t received your W-2 by February, you may need to contact your employer and request that it be re-sent. You can also contact the IRS at 800-829-1040. You need to provide your Social Security number, address and other personal information. In addition, you need information about your employer and an estimate of how much you earned.
Online tax programs usually release their newest versions toward the end of the previous year. If you used one for last year’s returns, you’ll likely get an email about the service’s update for the 2018 tax filing season.
How we tested tax software
To find the best tax program we filled out returns using a common scenario. We looked at how easy it was to fill out a return. Filing your taxes can be frustrating, no matter how complicated they are, so we looked for features that make filing your taxes as smooth as possible.
The best programs are easy to navigate, clearly showing you all the steps you need to go through to enter your information. We liked ones that highlight all the most important places you might want to backtrack to. Many now include the option to import your W-2, a time saving feature that ensures your information is accurate.
One of the most crucial things we found was the way each program flags errors. It’s easy to make mistakes – we made a few by putting an income amount in a tax-withheld box. Programs like Turbo Tax and FreeTaxUSA won’t let you proceed if you make an error. They call it out immediately and have you correct it before moving on. Programs like Jackson Hewitt are lacking in this regard. They wait till the end to show errors and, even more frustratingly, make you click back through your return without noting what needs to be corrected.
For most of these programs, filing your state returns is even easier than the federal return. The tax software transfers the information you already entered to complete your state return automatically.
Most of the programs we reviewed offer some type of free return. Usually this is for the most basic type of return, a 1040EZ or 1040A. If you’ve got a complex return, want to itemize your deductions or are self-employed, you’ll likely have to pay for more advanced versions with features for those specific situations.
What else to consider when choosing tax software
Audit Protection
Audit is a scary word, and most of these programs try to upsell you some form of protection. Often these come bundled with identity theft protection or other services. The typical audit protection means that you’ll get one-on-one guidance from a tax professional. Some audit defense packages include representation from the company, who will gather documents and work with the IRS on your behalf. These protection plans can be expensive, with costs ranging from $44.95 to $6.99.
Many services, such as Turbo Tax and H&R Block, have free audit support. This is a scaled-down version of the audit protection you pay for, and the main benefit is that the tax software company will provide an explanation and assistance in preparing for an audit. It doesn’t provide any representation or help with preparing documents.
Audits are rare. Usually only about one in 100 returns are audited. Really, you only need to worry about an audit if you’re filing a complicated return. If you’re filing a Schedule C for self-employment income, you are more likely to be audited. Often audits occur due to a lack of good record keeping, something that audit protection can’t really help with. Audit protection, like accuracy guarantees, generally cover little more than assurance that the return was done correctly, based on information that you provided.
Refund Advances
The most common way to get your tax refund, if you do get one, is either through direct deposit or a check in the mail. Some places may also provide prepaid cards. If you need the refund immediately due to some financial hardship, you may be able to get an advance. H&R Block, Credit Karma, Liberty Tax and Jackson Hewitt are the companies we reviewed that offer advances.
The advance isn’t quite a loan – there’s no interest or fees, only the requirement that you file through the company providing the advance.
The advances are often loaded onto a prepaid card, so be conscious of any fees associated with those cards. Generally the fee is a few dollars per withdrawal, so check to make sure the card has a free ATM network associated with it. Some advances can be direct deposited as well.
Are free tax filing services actually free?
Come tax time, every tax program advertises itself as free, free, free. But what’s the catch? The actual cost depends on how complicated your returns are and which service you use to file your taxes. Below, we look at which companies offer free filing and how you can qualify.
IRS: If you earned less than $66,000 in income during 2018, you may be eligible to file for free through the IRS Free File program. This is a partnership with a variety of tax filing companies that lets you complete your federal and state returns for free.
Credit Karma: Of all the tax programs we reviewed, Credit Karma is the only one with no exceptions to its free filing. No matter your tax situation, you can file your federal and state returns for free.
TurboTax: Whether you can file your taxes for free with TurboTax depends on how complex your return is. If you have a basic return with just a W-2 and the Earned Income Credit, you can file your state and federal returns for free. However, if you have a more complicated return and want to itemize deductions, you need to pay for the Deluxe Edition, which costs $39.99. If you’re self-employed, you may need to pay $89.99 for the Self-Employed edition.
H&R Block: This company has a stronger free version than TurboTax. You can claim more deductions, including student loan interest and child care. Homeowners need to pay for the $29.99 Deluxe Online edition, which lets you deduct mortgage interest. Also, freelancers need to pay $49.99 to file. If you file a non-free federal return, H&R Block charges an additional $36.99 to file your state return.
Professional Tax Software For Preparers
TaxSlayer: Only the most basic returns are free to file. If you have dependents or a return that requires anything beyond a Form 1040, you have to pay $17 to use TaxSlayer Classic, which lets you access all the forms and deductions. State returns cost an additional $29.
Liberty Tax: There’s no free-file option through Liberty Tax. Basic returns cost $24.95 plus $35.95 for state returns. If you need to itemize your deductions, you have to pay $34.95.
FreeTaxUSA: Federal returns, no matter how complex, are free to file through this service. It cost $12.95 to file state returns. For $6.99, you can purchase a Deluxe edition that provides real-time assistance filing your taxes.
TaxAct: Like many companies, if you just file a basic Form 1040, you can do so for free. If you have dependents or other tax credits, you must pay $9.95 to use the Basic+ edition. If you want to itemize deductions, you need to pay $29.95 for the Deluxe+ edition. State returns cost an additional $19.95.
Jackson Hewitt: The free version works for basic returns with less than $100,000 in income. If you have dependents, you pay $29.99, and state returns cost $36.95. If you want to itemize deductions, it costs $49.99.
How much does it cost to have taxes prepared professionally?
Taxes can be daunting, and the idea of having a professional do them for you is very appealing. It can be expensive though, with standard returns costing around $100 and returns with itemized deductions costing upward of $200. If you’re self-employed and need to file a Schedule C, it can cost even more, up to $400. You can use an online tax program for free if you have a simple return, though a more complex return can cost between $40 to $80 to file, depending complexity.
If you itemize your deductions or have a lot of business or investment income, you may want to find an accountant or tax preparer. Most online tax software includes the option to have a professional review your return.
If you choose to have your taxes prepared by a professional, know that they can only charge a flat fee. Avoid anyone who charges a percentage of your return. Also, tax preparers can’t charge contingency fees, except in rare circumstances.
Professional tax preparers may also charge more during peak season – if you try to get your returns done at the last minute, it can be more expensive, sometimes costing as much as $100 extra. You also must pay an additional fee if you need a return expedited or need to file an extension.
How to file if you don’t get a W-2
Generally, if you work a job, taxes are withheld from each paycheck and you receive a W-2 at the end of the year. However, freelance and contract work is becoming more common. In fact, an NPR/Marist University poll shows that one in five American workers are contract employees. Some experts estimate that within a decade, more than half of all workers will be employed on a contract basis.
While freelance positions give you flexibility and control, you’re also on the hook for your own taxes. You’ll get a form 1099-MISC that documents the income you received, but as part of your returns, you’ll need to figure out the taxes yourself. Because income, Social Security and Medicare taxes aren’t taken out by the person who paid you, you have to deduct them yourself. In some cases, the IRS may expect you to make quarterly income tax payments.
Fortunately, there are also many deductions you may be eligible for, which can potentially reduce the amount you pay. For example, you can deduct your home office, travel and other expenses. If you work for a ride share, you can deduct your mileage, car insurance and other expenses.
One drawback of having to file taxes as a self-employed person is your returns will be more complex, which is why most online tax programs don’t support free filing for self-employed workers. As such, you’ll have to pay to use those services.
How will the government shutdown affect tax returns?
Many government agencies have been affected by the shutdown, and there’s a lot of confusion about which are operating. With tax season fast approaching, there’s also been some uncertainty about whether or not tax returns will be processed and refunds sent out. Though it's unlikely the shutdown will last until April 15, the earliest day for filing returns is Jan. 28.
The IRS recently stated it would bring back furloughed workers and begin the filing season as normal on Jan. 28. This means as soon as you get your W-2 and other necessary documents, you can begin filing your taxes as you normally would. You can also use a tax program or professional to prepare your return earlier and submit it as soon as you’re eligible too.
Though tax returns will continue on schedule, there are other ways the shutdown will affect people trying to file their tax returns. The primary way is it will likely affect people trying to get help with their returns. Many workers who remain furloughed are those who answer the public’s questions. This could be compounded by the fact that this is the first year with significant changes to the tax code, which could result in many more people needing help.
There are also some new regulations and deductions that are unclear, especially for small businesses. Until there’s clarity about them, it will be difficult to file returns. In addition, people filing amended returns will likely be delayed even longer. Amended returns are usually processed by hand and take up to 16 weeks in optimal conditions.
Life changes that can affect your taxes
Your tax status can change a lot depending on what happened in your life the preceding year. Here’s how some common major life events can affect your taxes:
Getting Married
This has one of the greatest effects on your taxes. When you get married, you can choose to file jointly or separately. Most often, people file jointly because doing so gets you a larger standard deduction, and you end up paying less in taxes. You also become eligible for other tax benefits like a student loan interest deduction. It’s rare, but there are occasions where you may be better off filing separately.
Having a Child
Having a baby, adopting or otherwise claiming a dependent gives you many other opportunities for tax benefits. You can claim the child tax credit, which is worth $1,000 per qualifying child. If you adopt, there’s a separate tax credit you can claim. Also, you can claim a deduction for out-of-pocket child care costs.
Buying a Home
There are some tax deductions available to homeowners. Chief among them is the mortgage interest deduction, though it is usually only an option if you itemize your deductions. Deductions may be available for mortgage points and property tax payments.
Going Back to School
There are a variety of deductions you can claim on your education costs when you go back to school. You can deduct tuition, fees, supplies or other expenses, but you can’t claim more than one tax break for the same expenses in the same year.
What documents do I need to file my taxes?
The documents you need to complete your tax form depends on where you work, if you own a home and various other factors. Here are a few of the documents you may need as you start to file your taxes this year:
W-2
This is the most common form, and it shows the income you received from your place of employment.
Form 1099
This type of form supplies information about additional income. There are specific 1099 forms for cancelled debt, foreclosed homes, dividends, rental income and many other types of miscellaneous income not covered by W-2s. The most common of these forms is probably the 1099-MISC – it covers self-employed income and is the form most commonly used by freelancers and gig-economy workers. The threshold for needing to fill out a 1099-MISC is $600.
Schedule C
If you own your own business, you fill out a Schedule C to report your profits or losses from the preceding year.
Form 1098
This form has information about expenses you might be eligible to deduct. The standard Form 1098 is for mortgage interest. A form 1098-E covers student loan interest, and a 1098-T applies to tuition costs. If you’re a student, you may get these forms and be eligible for various deductions.
Form 2441
This form allows you to deduct between 20 and 35 percent of your child care expenses up to $3,000. The amount you can deduct depends on your income. You need to provide information about the care provider.
Lacerte Software
How to file an extension
Taxes are always due April 15, unless that day falls on a weekend or holiday. In that case, they’re due the following Monday. If you haven’t finished your tax returns in time, you can fill out a form and request an extension from the IRS. You don’t need to provide any justification – the IRS will grant the extension regardless of why you need it. When you file an extension, you have an additional six months to complete a return. If you are out of the country on tax day, you can file for a two-month extension.
To get an extension, you usually need to fill out a Form 4868. On the form, you need to provide an estimate of your tax liability, how much you expect to pay and the balance of those two amounts. You don’t need to be 100 percent accurate, but get as close as you can. If you use Free File, you can request an extension through it. Most online programs, including TurboTax, let you request extensions as well.
It's critical to remember that while the extension gives you an additional six months to file your return, it doesn’t give you longer to pay whatever you owe. That’s why you need to be as accurate as possible when filing your Form 4868 and pay whatever you owe before the April 15 deadline. You will still owe any outstanding balance. In addition, you will be assessed a 0.5-percent-per-month late payment penalty and possibly have to pay additional interest. One reason to file an extension is to avoid the 5-percent-per-month late filing fee.
How do withholdings affect your taxes?
Taxes can be complicated, and withholdings add to that. A W-4 form tells your employer how much tax to deduct from your paycheck based on the number of allowances you claim. The more allowances you claim, the less money is deducted from your paycheck and the likelier you are to have to pay taxes. Claiming fewer allowances increases the likelihood of getting a refund. Claiming zero allowances means your employer will withhold the maximum amount possible.
Generally, the allowances you claim depend on your marital status, how many dependents you have and whether you can be claimed as a dependant. If someone claims you, selecting zero or one on your W-4 is ideal. Similarly, if you’re single, claim one or two. If you’re married with one dependant, claim two. For each additional dependant, you can add one more allowance. The IRS has a calculator that can help you figure out how many allowances to claim on your W-4.
Be aware that it’s possible to have too little withheld from your paycheck, in which case you might end up paying penalties and interest. If the IRS finds you claimed allowances you shouldn’t have, you may have to pay a $500 penalty.
Due to tax code changes in 2017, withholding tables have changed, which increased paychecks but reduced refunds. With this in mind, the IRS recommends looking through your withholdings and reducing your allowances.
Which deductions and credits have been eliminated?
The Tax Cuts and Jobs Act passed in 2017 significantly changed an already complicated tax code. Some changes adjusted tax brackets and enlarged the standard deductions. Other changes removed specific tax deductions and credits. Here are some of the most popular deductions and credits that are no longer available:
Personal Exemptions: One of the biggest changes removed the personal exemption. This popular exemption allowed you to claim a deduction for yourself, your spouse and every child living in the home. In 2017, this exemption was around $4,000, so a large family could see a significant reduction in their tax bill. It was thought that the standard deduction increase would compensate for removing the personal exemption, but large families can expect to see a higher tax bill.
Moving Expenses: In previous years, you could deduct moving expenses if you moved for a job or were self-employed. That deduction was eliminated, so you can’t recoup those expenses at the end of the year. If you need to move, you may want to look for ways to save money in the process such as by using moving containers instead of hiring a moving company.
Home Equity Loan Interest: If you have a home equity loan, you used to be able to deduct any interest from it. This year, there are more restriction on this deduction. You can only deduct the interest if you use your home equity loan to buy, rebuild or improve your home.
Employment Expenses: In previous years, you could deduct expenses that have not been reimbursed, so long as they are related to your job and exceeded 2 percent of your gross income. This deduction is no longer available, so push harder to get your employer to cover those expenses.
Should you itemize your deductions?
One question that comes up each year when it’s time to file your taxes is whether you should itemize your deductions. In previous years, one in four taxpayers benefited from itemizing their deductions, either by getting a refund or paying less to the IRS. The math may be different this year – the 2017 changes to the tax code nearly doubled the standard deduction, so it’s less likely you’ll be able to itemize. In addition, other changes to the law lifted limits on the amount of itemized deductions you can make.
The standard deduction for 2020 taxes is $12,000 for individuals filing by themselves or $24,000 for married couples filing jointly. To itemize, your other deductions need to exceed those amounts.
Your mortgage interest is a good starting point for itemizing your deductions. Your lender will send you a Form 1098, which lists the interest you paid on your mortgage as well as the amount you paid for points to reduce your rate. If this amount exceeds your standard deduction, itemizing is a good choice, and anything else you itemize will only add to your deductions.
Other deductions you can itemize include income taxes paid to your city and state. You can also deduct medical expenses if they exceed 7.5 percent of your adjusted gross income – so if you earned $50,000, you won’t be able to deduct the first $3,500 of your medical expenses.
Next to your mortgage interest, charitable giving is one of the best ways to itemize your deductions. Most donations you make can be deducted, provided they are to a 501 (c) (3) organization. You need to have a receipt or cancelled check to document any deductions you make, so keep those on hand.
How do state and local taxes affect your federal returns?
State and local taxes vary wildly depending on where you live. Some states have no income taxes at all, some have a flat tax and some have tax structures that mimic the federal government with graduated structures and different tax brackets. Some cities in certain states also apply their own taxes, which also vary in structure.
You can deduct your state and local taxes from your federal returns. This includes not only income tax, but also property tax and sales tax if you don’t deduct any local taxes. This is often referred to as the SALT deduction. Like many aspects of U.S. tax codes, this was significantly changed with the 2017 Tax Cuts and Jobs Act, which takes effect on your 2018 tax returns. Prior to 2018, you could deduct all of your state and local taxes, including property taxes from your federal taxes, with no limit. In states with high state income taxes and property values, like California and New York, this was a generous benefit that cut down significantly on an individual’s federal taxes.
Going forward, this deduction of state and local taxes has been capped at $10,000. So if you pay $7,000 in state taxes and $5,000 in property taxes, you can only deduct $10,000 of that $12,000 total. If you’re married but filing separately, the limit is $5,000. With the increase of the standard deduction, this is yet another deduction that is less likely to be used because fewer people may opt not to itemize.
How to file in multiple states
If you moved or worked in more than one state, your state tax returns can make tax season more complicated. This doesn’t affect your federal return, but you could end up filing more than one state return. And while the process isn’t much more complex, you may need to give yourself more time to fill out your returns. Here a few scenarios that may require you to file multiple state returns:
The most common reason for filing multiple state returns is moving. If you moved to another state during the tax year, no matter the reason, you need to file part-year returns for both states. Depending on the state, you may have to file a completely separate form for a part-year return or just fill out the regular return.
Professional Tax Preparer Software Compar…
Often when you move, you work at a new job with it's own W-2, and you just fill out each state’s return with the W-2 from the job you worked in that state. However, if you moved but still work for the same company, you only get one W-2 and need to allocate the income to each state based on how much time you lived there or using payroll data from your company. Most tax programs have tools to help you do this.
If you commute to work in another state, you need to file a non-resident return in the state you work in and a resident return in the state you live in. This doesn’t necessarily mean you’ll be double taxed – you get a credit in the state you live in that usually counteracts the amount you pay to the state you work in, though variances in each state’s tax rate may complicate this.