As someone who mixes and matches freelance work, contract jobs, and side income opportunities to earn a living, I have a pretty complicated tax situation. Millions of Americans are in the same boat – independent contractors, small business owners, and folks who earn passive income through investing.
While money may be no object to some, the costs of tax filing definitely matter to me and many taxpayers like me. It’s frustrating, but understandable, that business owners and independents have to pay more to file their taxes with brand-name services like TurboTax and H&R Block.
TaxAct used to be different from the rest of the pack. Unlike some better-known competitors, it had a robust free version that applied to the vast majority of tax situations, supporting the self-employed, those who take itemized deductions, investors with capital gains and losses, landlords, and anyone who finds themselves shut out of free tax-filing options. Instead of offering additional forms and schedules, TaxAct’s higher-priced plans were more about better customer service and value-added features, such as free phone support and federal-state return bundles.
The better customer service and value-added features still set the higher-priced plans apart, but TaxAct’s structure grew much closer to its principal competitors between the 2014 and 2015 tax years.
For the 2015 tax year, TaxAct’s free version is really only ideal for people with fairly simple tax situations – those who can get by filing a 1040EZ or 1040A. Self-employed workers and individuals with investment income or itemized deductions need to spring for one of TaxAct’s paid plans. That said, TaxAct’s higher-priced options are still far cheaper than those of TurboTax, and significantly cheaper than those of H&R Block.
On the other hand, TaxAct’s lower prices come with some drawbacks, including a sometimes confusing and ultimately less-than-helpful customer support infrastructure, limited importing capabilities, and stingy access to past-year returns. Its navigation framework can also be confusing and almost overwhelming, limiting your ability to work through a return on your own terms. However, if you’re fine with a slightly rougher approach to tax filing for a much lower cost, TaxAct is definitely worth a closer look.
Plans, Pricing & Features
TaxAct offers four main plans: Free, Basic, Plus, and Premium. Additionally, it offers Estates & Trusts, a less commonly used and somewhat more expensive option for filers with income from trusts or estates. If you’re confident in your ability to complete your return with minimal guidance, you can manually select which topics to work on, and skip over any that don’t apply to your situation.
If you’re new to the filing process or have a complex tax situation that you’re not sure can be navigated without assistance, you can elect to use TaxAct’s step-by-step guidance. This is an interview-style process with questions that help you determine which forms and schedules you need to file, and which credits and deductions you may be eligible to take.
Whether you choose the self-guided or step-by-step guidance option, you have the option to skip ahead in your return. For instance, you can bypass the entire Miscellaneous section if none of the less-common situations in it apply to you. If you have enough confidence and experience to file your own taxes without having your hand held, this offers valuable flexibility. However, it’s not recommended for filers using the step-by-step guidance option, particularly those who aren’t super comfortable with the tax prep process in the first place.
It’s worth noting that TaxAct has an accuracy guarantee. If the software makes a calculation error that results in an IRS or state tax agency penalty, TaxAct refunds that penalty with interest. However, the guarantee doesn’t apply to the Estates & Trusts product.
The Free version is totally free – it costs nothing to file your federal and state returns. The Free version caters to simple tax situations that require only a 1040-EZ or 1040A to complete. However, its functionality and features, such as prior-year return importing and phone support, are somewhat limited.
- Simple Tax Situations. The Free version supports simple tax situations. If you earn all or the vast majority of your income from regular employment and don’t need to itemize your deductions, this version is probably all you’ll need. If you have a more complicated situation that includes investment income, itemized deductions, or self-employment tax, you need to upgrade.
- W-2 Importing. You can import W-2s from your employers, saving some time relative to manual entry.
- Past-Year Tax Return Importing. You can import your most recent tax return and all the information it contains, as long as you’ve previously downloaded it in PDF format, from TurboTax and H&R Block.
- TaxAct Bookmarks. This handy feature lets you bookmark any interview question that you’d like to return to at a later time.
- At-a-Glance Help During the Filing Process. TaxAct’s filing system boasts a useful help panel on the right sidebar, next to the fields you use to actually complete your return. The panel’s search feature can help you find answers to quick questions, but it’s worth noting that clicking on individual results to get more detail takes you to TaxAct’s main help system (and temporarily away from your return).
- TaxPayer Support. This is TaxAct’s email support system. TaxPayer Support personnel have familiarity with the technical aspects of the TaxAct system and experience with basic tax issues, but aren’t necessarily certified accountants or tax experts. Emailed questions typically produce a response within one business day, sometimes faster. TaxAct doesn’t offer live phone support to Free users. If you require technical or tax support by phone, you need to update to a paid plan.
This plan costs $14.99 for your federal return, plus $14.99 for each state return. It has all the features and functions of the Free Federal plan, plus the following:
- Transfer Last Year’s TaxAct Return. If you’re a returning TaxAct customer, you can transfer the information from last year’s return.
- Free Phone Support. With the Basic plan, you can call in and speak with a TaxAct representative for free.
- InfoArmor. InfoArmor is a complimentary identity theft detection and restoration service. If prior identity theft is uncovered during the tax prep process, InfoArmor pairs you with a dedicated case manager, tasks its team with assessing and repairing the damage, and sends out fraud alerts to your creditors and credit reporting agencies.
This plan costs $19.99 to file your federal return and $19.99 for each state return. It’s a much more robust program that can handle moderately complicated tax situations, including itemized deductions and investments, though it’s not sufficient for small business owners and others with very complicated taxes. It includes everything in the Basic plan, plus:
- Itemized Deductions (Schedule A). If you choose to itemize your deductions, which is a common practice for homeowners, parents, and others with more complicated tax situations, you need to file Schedule A.
- Interest and Dividend Income (Schedule B). If you earned more than $1,500 from interest and/or ordinary dividends during the tax year, you need to file Schedule B.
- Capital Gains (Schedule D). If you earned capital gains income from the sale of an asset, such as a publicly traded security, you need to file Schedule D.
- Rental Property Income (Schedule E). If you earned rental or royalty income from owned real estate, you need to file Schedule E.
- Donation Assistant. This useful mobile app lets you track charitable contributions made during the course of the tax year. It also helps track the fair market value of non-cash donations, such as clothing, vehicles, and furniture. If you’ve kept paper records of these donations instead, you can also access Donation Assistant through your desktop TaxAct account. You can add to your Donation Assistant list throughout the year following your filing date.
This plan costs $29.99 for the federal return and $19.99 for each state return. It’s even more comprehensive than Plus, and is capable of dealing with most small business tax situations. In addition to all the features and functions of the Plus plan, it includes:
- Small Business/Self-Employment Income (Schedule C). If you earn the bulk of your income from contract or consulting work, or are the proprietor of a small business, you need to file Schedule C and pay self-employment tax.
- Farm Income (Schedule F). If you earn income from farming activities, you need to file Schedule F. (If you earn rental income from farmland you own, but don’t materially participate in farming activities, you can file Form 4835 with Schedule E.)
Estates & Trusts
This plan costs $49.99 for your federal return and $19.99 for each state return. It’s specifically designed to provide additional support for customers who need to file IRS Form 1041 and related forms, so it may not be necessary if your tax situation doesn’t involve income from a trust or estate.
- Support for IRS Form 1041 and Related Forms. This plan includes Form 1041 and all related forms necessary for income from trusts and estates. There’s a separate set of interview questions specifically devoted to trusts and estates, so you don’t have to worry about completely winging it here.
Small Business Packages
TaxAct has three additional packages designed for small business filers (not including Premium, which is suitable for some small business owners). The Sole Proprietor package costs $29.99 for the federal return, while the other three cost $49.99 for the federal return. Each state return costs $19.99, regardless of package.
- Sole Proprietor. Includes support for IRS Form 1040 and Schedule C, and is ideal for those who are self-employed, as well as for freelancers and contractors.
- Partnership – LLC. Includes support for IRS Form 1065 (U.S. Return of Partnership Income) and a host of associated forms commonly used by partnerships.
- C Corporation. Includes support for IRS Form 1120 (U.S. Corporation Income Tax Return) and associated forms.
- S Corporation. Includes support for IRS Form 1120S (Income Tax Return for S Corporations) and associated forms.
In addition to its free and paid tax filing packages, TaxAct’s most important features include the following:
- Tax Return Status App. TaxAct offers a slick iOS and Android app that provides status updates on your state and federal returns (including whether the IRS and your state treasury have accepted them) and helps you estimate how long it should take to get your refund. It’s free for anyone, including non-TaxAct users, to download and use – and though the Federal Government also provides online updates to your return’s status and estimated refund arrival dates, it’s far more mobile-friendly than the IRS’s website.
- DocVault. This is a free mobile app that lets you take photos of anything related to your taxes for the current or coming tax years, including forms, receipts, bills, and invoices. You can edit the photos as necessary and store them in DocVault until you’re ready to file. Each individual DocVault account comes with 3 GB of image storage.
- Data Archive Service. If you want access to your TaxAct returns from the past three years, you need to tap the company’s Data Archive Service, which stores completed and partially completed returns. There’s a one-time fee of $13.99 to access each return, after which you can view, complete, and amend it at will. You also have to purchase whichever plan is necessary to complete the prior-year return(s), if you haven’t already or don’t currently have the right plan. The Data Archive Service is often used by people who need to amend a previously filed return due to an IRS audit or other issue, as well as by folks who need to access completed, accurate returns for whatever reason.
- Prepaid Visa Card Refund Promotion. TaxAct partners with American Express to offer federal refunds on a reloadable prepaid debit card, the Serve Free Reloads Card. For a limited time, you can get a $9.99 discount on a Basic, Plus, or Premium package when you elect to receive your refund on a Serve card. Keep in mind that the Serve Card has a $4.95 monthly fee and may come with other fees, such as ATM withdrawal fees. Also, you can’t receive state refunds on your Serve card.
- Guaranteed Pricing. If you don’t complete your return in one sitting, TaxAct’s Price Lock Guarantee guarantees that you remain locked into the advertised price for your plan at the moment you created your account – even if you did so in January and let your account sit until April. This is useful if TaxAct decides to raise its prices partway through tax season. Within a few minutes of creating my account, I received this email outlining exactly what I’d be paying for this year’s return.
- Audit Support. TaxAct has a helpful audit support knowledge base called Audit Assistant. While it doesn’t put you in direct contact with customer service employees or tax professionals, it does feature a database of common IRS notices and detailed information about common audit-related topics, such as how long you should save documentation related to your tax return and which documents you need when responding to specific IRS requests.
- Audit Defense. Audit Defense is a more hands-on approach to audits, offered in partnership between TaxAct and Tax Audit Defense. It costs $39.99 and covers you for as long as your state and federal returns can be audited. It connects you with tax professionals who handle all correspondence and discovery, helping to interpret IRS notices and requests, and direct negotiation of penalties and potential settlements with the IRS or state treasuries. You need to purchase Audit Defense when you file, but you can cancel for a full refund within 30 days of purchase, as long as you haven’t already received an audit notice.
1. Very Affordable at All Levels of Service
TaxAct is extremely affordable. Its most expensive federal package for individual filers (Estates & Trusts) is $49.99, plus $19.99 for each state return. However, Estates & Trusts is a niche product – the most expensive package that sees heavy use is Premium, which costs $29.99 and $19.99, respectively, for federal and state returns.
By contrast, some of TaxAct’s better-known competitors charge double or triple what TaxAct Premium costs for similar levels of service. TurboTax’s highest-priced federal plan is $104.99, while H&R Block’s is $74.99. The most you can expect to pay for state taxes at TaxAct is $19.99, compared to $39.99 for individuals and small businesses at TurboTax.
A real-world example: If you’re self-employed and need to file Schedule C, you’d have to pay $114.98 (including one state) for H&R Block Premium, and $94.98 for TurboTax Deluxe. Using TaxAct Premium to file the same exact return, you’d pay just $49.98: $29.99 for your federal return, and $19.99 for one state.
2. DocVault Is a Great Way to Keep Track of Forms
TaxAct’s DocVault app is a simple way to keep track of prior years’ tax forms and tax-related material, such as invoices and receipts. Having access to all these items on a mobile device can save untold amounts of time during tax season and eliminate the need for a well-organized paper filing system at home. Many other tax filing services, including eSmart Tax, don’t have a DocVault-like app.
3. Not as Sales-y as Some Competing Platforms
Though it does offer different price points, TaxAct is only minimally sales-y. It doesn’t push you to upgrade to a higher-cost plan or hound you to purchase add-on services.
Put another way, TaxAct’s website has a pretty laid-back layout and tone. If you try to do something that isn’t supported by your current plan, you’re politely prompted to upgrade. If you’re interested in value-added services, you aren’t reminded of them via jarring pop-ups or ad screens – you can simply find them on each plan page. By contrast, both H&R Block and TurboTax actively encourage customers to sign up for higher-cost plans or add-ons with varying degrees of pushiness.
4. Price Lock Guarantee Is Useful If You Don’t Finish Filing Right Away
Since I’m self-employed and have multiple sources of income, my tax situation is fairly complicated, and I often have to wait for all the necessary forms and statements to dribble in. Weeks may pass between the first time I sign into my tax preparation account and the day I actually finish my state and federal returns. TaxAct’s price guarantee is useful for people in my situation – no matter how long we dally before filing, we’re assured of the best available price on our returns.
Many online tax filing services, including TurboTax and H&R Block, don’t offer price lock guarantees. If they raise prices before you finish your return, you could be stuck paying the higher price.
5. Helpful Editing Functions During the Import Process
TaxAct’s import feature lets you edit information on the previous year’s return before overlaying it onto the current year’s. This is very helpful if you moved (like me), got married (also like me), or experienced some other life event that results in changes to your basic information.
Other online tax filing programs, including TurboTax, import your return as-is and then walk you through the editing process step-by-step, asking if each item is still accurate. That’s much more time-consuming.
6. Prepaid Card Promotion Can Significantly Reduce Filing Costs
TaxAct switched to a new prepaid card partner for the 2015 tax year. To promote the new partnership, it’s offering a $9.99 filing fee discount for customers who elect to receive their federal refunds on the American Express Serve Free Reloads Card. That’s enough to negate the $9.99 federal filing fee for Basic plans – a great deal for people without super-complicated tax situations. And, if you don’t want to pay the recurring $4.95 monthly fee, you can simply cancel your Serve account once you’ve spent your refund.
1. Direct Access to Prior-Year Returns Isn’t Included
TaxAct doesn’t offer free access to prior-year tax returns. To see filed and partially completed returns from the past three years, you need to pay a one-time Data Archive Service fee of $13.99 for each return. Other online tax preparation software, including TurboTax and H&R Block, offer unlimited access to past-year returns with paid plans.
2. Support System Can Be Confusing
TaxAct’s customer support apparatus provides a lot of detail, almost to the point of being overwhelming. The help section is a hodgepodge of semi-related topics, and the search feature doesn’t always return relevant items. For instance, when I was researching the Amex Serve card promotion, I got bogged down with useless information about TaxAct’s previous prepaid card partner, which the company had neglected to clean up. To get the best results, you need to spend time and energy searching for the right answers.
Additionally, TaxAct seems to actively discourage people – even paying customers who ostensibly get free phone support – from calling in. The first number that comes up when you Google “TaxAct phone number” is the company’s media contact number, which is also the only number I could find on its website without clicking through those step-by-step questions and being offered alternative forms of assistance (such as FAQ items or email support).
3. No Gift Card Refunds
Though TaxAct lets you receive your federal refund on a prepaid debit card (and is offering a limited-time deal to promote this option), it stops short of offering refunds on third-party gift cards. That’s a big drawback relative to H&R Block, which lets you load your refund on any of about a dozen big-name gift cards, and offers a refund bonus up to 10% (for instance, a $1,000 refund becomes $1,100) for participating filers.
4. Short Timeout Fuse
TaxAct has one of the fastest timeout clocks I’ve ever seen – eight minutes, if I timed it correctly. While I appreciate the security benefits of session timeouts, such a short clock is overkill. After one particularly inconvenient timeout, I had to re-import my previous year’s return, eliminating the time benefit afforded by the easy import-editing process. In fact, this is the only online tax prep program I’ve ever used that hasn’t saved my progress after a timeout. (Fortunately, I wasn’t very far along in the process.) By contrast, I’ve never even been timed out of TurboTax, despite walking away from the editing window for long periods.
5. Only Supports Importing From Two Online Tax Preparation Services
TaxAct only lets you import the previous year’s return from H&R Block and TurboTax. While these are TaxAct’s two biggest competitors, other online services (TaxSlayer and eSmart Tax to name but a few) still handle millions of returns per year. Without support for imported returns from these lesser-known platforms, TaxAct isn’t exactly encouraging their customers to switch. By contrast, TurboTax lets you import from any online service, as long as it supports PDF conversion.
In the car business, there’s an old saying: “Only suckers pay sticker price.” In other words, a new or used car’s sticker price is really a suggestion, the dealer’s opening offer at the negotiating table. You’re expected to counter with a lower offer and strike a deal that everyone can live with.
With all the add-ons, upgrades, and processing fees, filing your taxes online can feel like the reverse. Your chosen plan’s sticker price is the bare minimum, an amount you’d be lucky to pay in the final reckoning. That’s not the case with TaxAct, which is far cheaper than its better-known competitors. TaxAct definitely requires some sacrifices and assumes a basic level of tax-filing familiarity that other services don’t, but at least it won’t leave you much lighter in the wallet.