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TaxAct Review – Free Online Tax Software

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At a Glance
4.3 / 5
Rating

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TaxAct

  • CPA Involvement: No, but good support for complex tax situations from non-licensed tax professionals
  • Plans: I Love Free, free state and federal filing for simple (1040EZ and 1040A) tax situations; Basic+, $9.95 for federal and $19.95 per state filing, ideal for families with simple tax situations; Deluxe+, $30.95 for federal and $39.95 per state filing, ideal for homeowners and others itemizing deductions; Premier+, $39.95 for federal and $39.95 per state filing, ideal for landlords, investors, and others with complex personal situations (plus priority support); Self-Employed, $59.95 for federal and $39.95 for state filing, ideal for sole proprietors and other self-employed filers (plus dedicated support)
  • State Returns Included: Included with Free plan; $39.95 per state for higher-priced plans
  • Pay With Your Refund: Yes; pricing varies
  • Audit Defense: Free informational audit support for all users; Audit Defense (partnership with Tax Audit Defense) provides hands-on representation for $49
  • Additional Benefits: Seven years of return access included; maximum refund guarantee; accuracy guarantee (up to $100,000)

As someone who does a combination of 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 matter to millions of people like me. It’s frustrating but understandable that business owners and independent workers have to pay more to file their taxes with brand-name services like TurboTax or H&R Block.

Or maybe not.

TaxAct is significantly cheaper than its better-known competitors, though its free version isn’t suitable for any but the simplest tax situations and its support infrastructure inspires less confidence than nervous filers might like. But substantial improvements to usability make it a serious alternative to gold-plated DIY products, to say nothing of full-service CPAs.

Let’s take a closer look at TaxAct’s plans, features, and overall suitability.

taxact best deal in tax

Plans, Pricing & Features

TaxAct offers five main plans:

  • I (Heart) Free, hereafter known as “I Love Free”
  • Basic+
  • Deluxe+
  • Premier+
  • Self-Employed

Less common products include:

  • Estates & Trusts, a pricier option for filers with income from trusts or estates
  • Distinct small business tax products for various legal business structures, including sole proprietorships, partnerships, S-corporations, C-corporations, and tax-exempt organizations
  • Online tax prep and e-filing solutions for independent CPAs

It’s also worth noting TaxAct guarantees the accuracy of all returns prepared with its software. TaxAct also has a maximum refund guarantee that’s technically distinct from its accuracy avowal. Bottom line: should you receive less than the maximum refund to which you’d otherwise be entitled or draw an audit due to an error in TaxAct’s software, TaxAct will pay the refund difference or cover any audit-related liability, up to $100,000.

Let’s take a closer look at each of

I Love Free

I Love Free is totally free: it costs nothing to file your federal and state returns. This plan caters to individual filers whose 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, don’t need to itemize your deductions, and don’t have dependents, 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.
  • At-a-Glance Help During the Filing Process. TaxAct’s filing system boasts a useful support panel on the right sidebar, next to the fields you use to 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 support system (and temporarily away from your return).
  • Unlimited Tax and Technical Support. TaxAct’s email and phone support system apparatus includes unlimited help with tax-related questions and technical platform issues. TaxAct’s support staffers aren’t necessarily licensed accountants, and they’re not guaranteed to have an answer for esoteric queries, but they are nevertheless authorized to handle general tax issues and provide basic advice and guidance for uncertain filers.
  • Personalized Financial Analysis. Known as BluPrint, this complimentary, automatically generated report uses your tax return (including deductions, investment earnings, and business activities) to recommend opportunities to save on taxes and make changes that may improve your financial situation going forward.

Basic+

This plan costs $9.95 to file your federal return and $19.95 for each state return. It’s designed for families with relatively simple situations. It includes everything in the Free plan, plus:

  • Claiming Dependents. If you have children or other dependents in your household, you can claim the relevant deductions with this version.
  • 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.
  • Unlimited Email Support from Tax Specialists. Enjoy unlimited in-app email support from tax specialists (not just TaxAct’s front-line customer service team members).

Deluxe+

This plan costs $30.95 to file your federal return and $39.95 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 complex 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.
  • Form 1040 Schedules 1 Through 6. This plan supports IRS Schedules 1 through 6, which cover various types of income, credits, and tax.
  • Donation Assistant. This useful mobile app lets you track charitable contributions over 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.

Premier+

This plan costs $39.95 to file your federal return and $39.95 for each state return. It’s designed for investors, rental property owners, and others with complex tax situations not adequately addressed by lower-priced plans. Premier+ includes everything in the Deluxe+ plan, plus:

  • Interest and Dividend Income (Schedule B). If you earned more than $1,500 from interest 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.
  • Priority Support. This plan comes with priority support from TaxAct’s in-house tax experts. Features include a dedicated phone line with screenshare capabilities and in-app chat functionality.

Self-Employed

This plan costs $59.95 for the federal return and $39.95 for each state return. It’s more comprehensive than Premier+  ideal for solopreneurs, small business owners, and others with complex or unusual tax situations. Virtually all IRS forms and schedules are available. In addition to all the features and functions of the Premier+ plan, Self-Employed 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.)
  • Year-Round Tax Planning Guidance. TaxAct’s team is available year-round for help with tax planning, a useful perk for self-employed people who need to pay quarterly estimated taxes or make contributions to solo 401(k)s or other retirement plans.
  • Deduction Maximizer. This is a step-by-step guide that helps self-employed filers claim every tax deduction to which their occupation entitles them. It’s built into the prep interface, so you might not even notice it’s running for you.

Estates & Trusts

This plan costs $59.95 for your federal return and $39.95 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 & Tax-Exempt Organization Packages

TaxAct has three additional packages designed for small business filers with complex tax situations. Each plan costs $59.95 for the federal return and $39.95 per state. That’s several hundred dollars cheaper than hiring a human CPA.

  • 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. 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.
  • Tax-Exempt Organization. All support necessary to file an informational return under federal income tax exemptions outlined in section 501(a), 527 & 4947(a)(1) of the tax  code.

Additional Features

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.

Prior Year Returns

If you want access to your TaxAct returns from the past three years, you can do so for free through your account dashboard. This is useful for filers 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 $20 bonus cash loaded to your card when you sign up for the service. Keep in mind that the Serve Card has a $4.95 monthly fee and may come with other charges, such as ATM withdrawal fees.

Guaranteed Pricing With Auto-Enroll

TaxAct’s Auto-Enroll service lets you lock in your return’s price before tax season begins, and for the duration – even if you don’t complete your return in a single sitting. This is useful if TaxAct decides to raise its prices before or partway through the present tax season.

Audit Defense (Protection Plus)

This benefit is offered in partnership between TaxAct and Protection Plus, a third-party provider. You need to purchase Protection Plus 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. The cost is usually $44.95 per taxpayer.

Protection Plus 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.

Advantages

1. Affordable at All Levels of Service
TaxAct is extremely affordable. Its most expensive federal package for individual filers, Self-Employed, is $59.95, plus $39.95 for each state return.

By contrast, some of TaxAct’s better-known competitors charge double or triple what TaxAct Premium costs for similar levels of service. The cost of TurboTax’s highest-priced federal plan approaches $200, for instance.

A real-world example: If you’re self-employed and need to file Schedule C, you’d have to pay approximately $135 (including one state) for H&R Block Premium, and nearly $110 for TurboTax Deluxe. Using TaxAct Self-Employed to file the same exact return, you’d pay just $99.90: $59.95 for your federal return, and $39.95 for one state.

2. Not as Promotional as Competing Platforms
Though it does offer different price points, TaxAct is only minimally promotional. 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.

3. Auto-Enroll Grants You Time
Since I’m self-employed and have multiple sources of income, my tax situation is somewhat 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 finish my state and federal returns. TaxAct’s price guarantee is useful for people in my situation – no matter how long we procrastinate 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.

4. 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’ve recently moved (like me), got married (ditto), bought a new house (yep) 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.

5. Prepaid Card Promotion Reduces Filing Costs
TaxAct offers a $20 cash bonus to filers who agree to load their refunds on an American Express Serve Free Reloads Card. That’s enough to negate the $9.95 federal filing fee for Basic plans – a great deal for people without super-complicated tax situations. If you don’t want to pay the recurring $4.95 monthly fee, you can cancel your Serve account once you’ve spent your refund. Just bear in mind that this promotion is subject to change or discontinuation at any time.

6. Human Support Is Better Than Some Competitors
The quality of TaxAct’s human support team has improved markedly since the early 2010s, when I first began preparing my taxes here. By the 2018 tax year, most paying customers had access to complimentary in-app chat or live phone support, and those willing to spring for higher-priced plans enjoyed dedicated lines to credentialed tax experts.

7. Direct Access to Prior-Year Returns Comes Standard
This is another recent positive change; previously, TaxAct didn’t offer free access to prior-year tax returns. To see filed and partially completed returns from the past three years, you had to pay a one-time Data Archive Service fee of $13.99 for each return. These days, prior-year access is included in your filing fee.

Disadvantages

1. Text 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, in the 2015 tax year, 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. TaxAct appeared to have fixed this specific problem for the 2016 tax year, but other topics remain cluttered with what appears to be outdated information.

Bottom line: to get the best results, you need to spend time and energy searching for the right answers.

2. Short Timeout Fuse
TaxAct has one of the fastest timeout clocks I’ve ever seen: roughly eight minutes. 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.

3. No Hands-off Prep Option
TaxAct remains a DIY tax prep aid, even as competitors like TurboTax move toward hybrid models that see (at least at higher price points) certified tax preparers or CPAs doing much of the grunt work. If you can’t devote several hours during tax season to prepping your return by yourself, you may be willing to pay more for hands-on help.

Final Word

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 for 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 remains cheaper than its better-known competitors. TaxAct requires some sacrifices and assumes a basic level of tax-filing familiarity, but at least it won’t leave you much lighter in the wallet.

If you’re looking to save even more money, check out our Top 7 Options for Free Online Tax Preparation Software & Services.

Have you ever user TaxAct or its competition? Let us know your thoughts in the comments below.

Verdict
4.3 / 5
Rating

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TaxAct

If affordability is a major concern, but you’re not willing to trade too much in the way of support and service, TaxAct may be the tax prep program you’re looking for. Though the free version can’t handle complex tax situations, higher-end versions are much more affordable than equivalent products from TaxAct’s top competitors. Value-added features like Deduction Maximizer and a personalized financial assessment are helpful, too.

TaxAct is great for budget-minded filers, regardless of financial complexity. It’s not perfect, though — pricier competitors offer more support and nuance.

Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Brian Martucci
Brian Martucci writes about frugal living, entrepreneurship, and innovative ideas. When he’s not interviewing small business owners or investigating time- and money-saving strategies for Money Crashers readers, he’s probably out exploring a new trail or sampling a novel cuisine. Find him on Twitter @Brian_Martucci.

Comments Disclosure: The below responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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